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Hillingdon seeks equity manager, shows Capital the door

UK   - The London Borough of Hillingdon Pension Fund has launched a tender for an investment manager to replace Capital International, which ran the active overseas equities segment of its portfolio, worth in total around €455.3m, until the end of June.

The decision to end the contract had been taken in March, because of prolonged fund manager underperformance, according to the council. At that stage, Capital were running 19.1% of the pension fund portfolio in terms of value.

The objective of the mandate now being advertised is to produce equity-like returns with no greater than equity volatility. The pension fund says it will consider global equity, multi-asset, absolute return and similar approaches, including fund of hedge funds.

A performance objective has not been set, but will be the subject of discussion with the successful manager.

The size of the mandate is flexible, with an initial target of £90m (€104m) (roughly 20% of the fund) and the potential to rise to £180m (€209m) (40% of the fund). The mandate may be split between managers.

The fund's portfolio is currently split between Alliance Bernstein, which runs active global equities on a growth and value blend basis; Goldman Sachs AM (active fixed income); SSgA (passive multi-asset (fixed income and global equities)); UBS (active UK equities on a value basis, and also property); and LGT Capital and Adams Street, which manage the private equity investments.

The fund's results for the first quarter of 2009 showed a continued underperformance against its benchmark.

As a whole, the fund lost 8.55% over the quarter to 31 March 2009, underperforming its benchmark by 0.11%. Over the 12 months to the same date, it lost 24.3%, an underperformance of 3.1%.

Four of the then managers underperformed their benchmarks for the first quarter of the year. Ironically, Capital International lost 8.40% but outperformed its benchmark by 1.81%, while UBS Property lost 7.57% and outperformed its benchmark by 0.23%.

Meanwhile, the Goldman Sachs benchmark used by the fund has also been realigned to take advantage of current opportunities in the fixed income sector.

The deadline for tenders is noon (UK time) on 7 September 2009. Pre-qualification questionnaires and more information are available from Hymans Robertson.

 

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