Kingston seeks transition manager for portfolio restructure
UK - The Royal Borough of Kingston upon Thames is seeking a global transition management provider for its pension fund.
Earlier this month the council issued tender notices for four new investment managers and a global custodian, after a full review of its pension scheme allocation strategy revealed it to be "not efficient or effective". (See earlier IPE.com article: Kingston restructures 'inefficient' portfolio)
However, following the development of a new investment strategy - entailing the appointment of at least four new managers for a bonds portfolio and three global equity mandates - the council has started a search for a transition manager.
The tender notice revealed the manager will be appointed for a minimum of five years, with the possibility of a further five-year extension after a triennial performance review.
Kingston said it had decided to appoint an independent transition manager "to ensure that the complex movement of assets are transferred securely to the new investment arrangements".
UBS Global Asset Management has run the entire fund on a passive basis since June 2007 - after the pension fund terminated an active global equities mandate run by Capital International in May 2007 - on a temporary basis while Kingston considered a new strategy.
Figures from the tender notice claimed assets under management by the transitional manager would be around £330m (€417m). Latest figures from the council showed the value of the fund was £319m at the end of March 2008.
The restructuring of the pension portfolio follows the scheme's latest actuarial valuation in March 2007, which revealed Kingston had a funding level of 70%.
As a result, in May the council authorised a revised investment strategy - to include alternatives at a later date - in an effort to "optimise investment risk and return" to become fully funded.
At the same time, Kingston also decided to re-tender its global custody mandate, currently provided by JP Morgan, as it had not been "subject to market-testing recently". (See earlier IPE.com article: Kingston adds custodian to search list)
The council confirmed the pension fund panel will receive an update on the manager selection process - scheduled for completion by December 2008 - at its next meeting in September, with overall fund performance for the year presented to the scheme's annual general meeting in October.
Latest performance figures from Kingston show that the passively-managed fund achieved a return of -6.0% for the first quarter of 2008, against the local authority benchmark return of -6.7%. To the year to March 31 2008, the fund achieved a return of -2.4% compared to the local authority average of -3.8%.
The closing date for tender applications for the transitional manager role is August 15 2008.
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