UK - East Sussex County Council has appointed Legal & General Investment Management (LGIM) to run a specialist £275m (€295m) passive UK equity mandate.

LGIM had been running the UK mandate on an interim basis, after the pension fund sacked its former managers, UBS and Capital International because of performance issues in March 2007 when the scheme concluded its last three-yearly review.

In addition, the UK local authority is currently looking for managers for two new global equity mandates, even though it began the tender process in April 2008. (See earlier IPE story: East Sussex reviews equity mandates)

East Sussex said the response of both asset managers to their poor results helped it to decide to dismiss UBS and Capital over its UK equity portfolios, though both firms have been invited to participate in the ongoing global equity manager search.

"Consideration of 'well below target' performance from UBS and Capital over a protracted period, together with the responses of the two firms to the disappointing returns, resulted in a decision to transfer the UK equity components of the mandates to a passive UK equity manager," the local authority revealed in earlier committee meeting notes.

East Sussex said it was keeping an open mind on the success of the mandate as it is keen to broaden its remit - to possibly include overseas equities - in the future.

The scheme has run into slight trouble in the past few years, as investments returned -2.6% during the financial year to 31 March 2008 and the funding ratio had fallen to 89% by its 2007 valuation. The overall value of the scheme's assets fell during 2007/2008 to £1.68bn from £171bn the previous year.

UK equities currently account for some 30% of the scheme's overall long-term strategic portfolios, which equities dominate with 68.5%. But recent short-term re-weightings have seen the fund increase its cash holdings at the expense of its equity allocations relative to long-term strategy.

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