UK – The £3.5bn (€5.7bn) London Regional Transport Pension Fund has dropped Baring Asset Management (BAM) from a UK equity mandate originally worth £500m (€821m) in favour of AllianceBernstein and Baillie Gifford.
Chris Angell, the fund’s secretary, says that there were two reasons for the change. “It wasn’t just performance, though under-performance did play a part, that led us to part company with BAM last December. Personnel changes at BAM were also a decisive factor in our decision to rethink our UK equity allocation policy to avoid finding ourselves in a position where one manager could tilt the balance either through under or over-performance.”
The fund’s UK equity portfolios, which account for 30% of its overall assets, were previously managed by BAM and Société Générale (SG). SG has been retained in a new structure that divides the UK equity assets among three managers with equal portions, instead of two. SG is now joined by Baillie Gifford and AllianceBernstein.
”The new structure means that no single active equity manager controls more than 10% of the fund in terms of value. This is not just a consequence of the BAM problem, but it allows us to control manager and market volatility more effectively,” says Angell.
George Harvey, head of sales and business development at BAM says it was an asset allocation review by LRT, not underperformance that led to Barings being fired.
“It was found during the review that BAM’s investment style was no longer consistent with the investment strategy preferred by the LRT pension fund. Accordingly, the fund’s investment administrators found themselves under pressure from the trustees to change the manager base. LRT has indicated that it was not dissatisfied with BAM’s performance,” he says.
Angell says that the fund’s other portfolios comprising, global index tracker, fixed income, European equities, US equities and Asian equities remain unchanged. “Market volatility is much less an issue in these areas,” he says. The respective managers for these portfolios are BGI, Henderson, Gartmore, JP Morgan and Schroder.