UK - Lancashire County Council Pension Fund is seeking a UK and global equities enhanced index-tracking manager to run around £350m (€431m) assets previously managed by Schroder Investment Management.
The £3.6bn local authority pension fund terminated the UK equity contract held by Schroders in September 2007, and halved the global equity mandate of Newton Investment Management following "significant underperformance" by the two managers.
These assets were temporarily transferred to a second index-tracking fund run by Legal & General on 19 September 2007, while the pension fund reviewed its investment strategy.
However, the fund has now tendered for a specialist UK and global equity enhanced indexation investment manager to run assets valued at £350m, which a spokesman for the scheme confirmed would be funded from the previous Schroders mandate.
The new contract is expected to last six years, although Lancashire County Council said the mandate could be split between more than one provider.
At the end of June 2008, the pension fund had an asset allocation of 61.67% in equities, with 33.29% in UK equities, while 21.42% was allocated to bonds, 5.06% was in property and private equity had an allocation of 4.09%.
The fund also had 2.66% allocation to hedge funds of funds, run by Gottex, which was awarded a £100m mandate by the pension scheme in September 2007. (See earlier IPE article: Gottex wins new local authority mandate)
However, the minutes from the last pension fund committee meeting revealed a revised investment strategy approved by the committee in January 2008 recommended the scheme should "give further consideration to more diverse range of alternative investments".
Suggestions for alternative investments included a 2% allocation to infrastructure investments; a further 2% to a global tactical asset allocation strategy, and an increase in the fund's current allocation to private equity from 3% to 5%.
As a result the scheme's investment panel has recommended an allocation of between 3-5% to infrastructure, and that the process for appointing a suitable 'fund of funds' manager should be started now, with the help of Mercer, to provide a shortlist ahead of its next meeting in November.
In addition, the revised investment strategy recommended an increased allocation to property from 7% to 10%, while the proportion of assets managed passively will increase from 27% to 45% - of which 10% will be managed on an enhanced basis - a decision based on statistical data which claimed, after fees, "passive management has achieved higher returns than active management in developed markets such as USA, Europe and the UK".
The pension scheme, which was 84% funded at the end of March 2007, is also intending to advertise for two independent advisers to the scheme on a three-year contract from April 2009, although a decision on the appointment of a new investment consultant has been delayed for 12 months.
The deadline for participation in the equity tender is 17 October 2008.
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