UK – The £740m (€1,215m) Lincolnshire County Council pension fund is likely to reduce its equity weighting as a result of an asset liability study (ALS) currently being undertaken to evaluate its investment strategy.
The results of the study have not been published yet but the fund says changes to investment policy are inevitable. “This is not an exceptional ALS, as it is part of our general three year scheme evaluation, but in broad terms we are looking at a reduction in our equity exposure,” says David Forbes, assistant chief finance officer of the pension fund, which has 33,500 members.
Forbes explains that there are two reasons for the fund to revise its asset allocation. “First, the fund is nearing maturity and it is not unusual for funds to move into fixed income at this stage in their development and secondly, recent market declines mean that, longer term, the prospects of the equity markets are not as bright as they have been historically.”
The fund’s current strategy gives it an 81.5% equity bias. The rest of its assets are invested in fixed income, real estate, private equity and cash. Forbes says that any changes are likely to be conservative, as the scheme is not considering investing in alternatives.
“Fixed income is the asset class that will probably benefit the most from any decisions we take. There will be some shift towards real estate and private equity, as well, but we won’t be investing in other alternative asset classes such as hedge funds,” he says
The results of the ALS could lead to manager changes, even though the scheme’s managers are not technically under review. “We do a fair chunk of investing in house and then our two main external UK managers are Deutsche Asset Management and Friends, Ivory & Sime. Although the managers are not specifically under review, any changes we make to our asset allocation strategy will obviously have an impact on our manager base, since we’re moving assets around,” says Forbes.