Harrow overhauls fund manager line-up
UK - The London Borough of Harrow has appointed four new managers to run the equity portfolio of its £300m (€333m) local government pension scheme, while its bond portfolio is being consolidated under one manager.
Harrow initiated a tender search for a UK passive equity manager and two global equity managers in October 2008, following a review of the fund manager structure over concerns about current and future performance. (See earlier IPE article: Harrow seeks UK passive and active global managers)
Myfanwy Barrett, corporate director of finance at Harrow Council, confirmed State Street Global Advisers had been appointed to run a UK passive equity mandate, while Wellington Management International, Fidelity International and Longview Partners have been awarded active global equity mandates.
She pointed out the overall weighting to equities has not changed, though all equity investments were previously managed actively and the UK portfolio had now been moved to a passive approach.
State Street's passive mandate is valued at around £100m, equivalent to around 26% of the fund, while the total overseas equity allocation is approximately 46.6%, or £125m, split as £55m to Wellington, £50m to Fidelity and £20m to Longview.
The pension fund previously employed six investment managers for the fund - BlackRock, UBS, Baillie Gifford, Record Currency, Pantheon and Mellon - but the new appointments replace UBS, which ran 44% of the fund in a multi-asset portfolio, and Baillie Gifford, which was responsible for 38% of assets held in specialist UK and global equities.
Barrett also added that the 13% bond allocation, which was previously split between UBS and BlackRock, is in the process of being moved solely to BlackRock. However this will still leave UBS with a small part of the property mandate, also run by BlackRock, while Record and Mellon will continue to look after currency investments and Pantheon remains responsible for private equity.
Latest figures published in the council's draft statement of accounts for 2008/09 showed the value of the pension scheme dropped from £409.4m to £307.4m over the year to 31 March 2009. This resulted in the pension fund investment panel being told in July that the return on total assets over a 10-year period was just 2% year, reflecting the negative returns from equities over the last 18 months.
Minutes from the meeting revealed the scheme's high allocation to equities compared to other local authority pension funds meant the overall results had been "eroded", while the negative impact of currency hedging and "poor performance of managers in a number of areas" had also contributed to a result that was "below the benchmark over the last three years and 3% behind other funds per annum".
That said the document noted the allocation to equities had been reduced in 2008/09 and instead been "invested in alternative investments which had risen by 2% for the same period".
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