EUROPE - The Fonds de Réserve pour les Retraites (FRR) has sacked BlackRock Asset Management, which ran a US small cap equity mandate on the fund's behalf. The mandate, worth worth €478m as at 1 November 2010, accounts for 1.4% of the FRR's €35.7bn-worth portfolio.
The FRR said the decision had been made because of unsatisfactory investment results, while its head of external asset management said any decision to award the mandate to a new asset manager would not be reached until next year.
BlackRock was awarded a five year contact in March 2008, at the same time as Allianz Global Investors France won a similar mandate of smaller size. Allianz then lost the mandate earlier this year.
Jean-Philippe Olivier, head of external asset management at FRR, told IPE that any decision as to awarding the mandate elsewhere, or any change in investment category, would not be made until after a routine strategic asset allocation review had been carried out next year.
Results as at 30 September 2010 show that the FRR has returned 2.7% over the year to date, although it gained 4.5% in the third quarter.
Fixed income and money market investments made up 59.4% of the portfolio, while performance assets represented the other 40.6%, split between equities (33.3%), commodities (3.8%) and real estate (3.5%).
BlackRock would not comment on the loss of the mandate.
Meanwhile, Merseyside Pension Fund (MPF) is to increase substantially the amount it has invested in fund of hedge funds with Pacific Alternative Asset Management Company (PAAMCO), which has been running part of the pension fund's hedge fund allocation for the past five years.
The total allocation to both fund of hedge funds and hedge funds held directly is around 5% of the pension fund's £4.7bn portfolio.
Paddy Dowdall, investment manager with responsibility for hedge fund investments at MPF, said that the decision to increase PAAMCO's mandate was part of a process to rationalise the hedge fund of funds portfolio.
He said: "We had four generic fund of hedge funds, run by PAAMCO and three other managers. PAAMCO had the best performance over the past five years, and they explained that performance well."
Dowdall added: "PAAMCO have avoided some of the well-known banana skins in the last couple of years - for instance, they didn't have the liquidity and Forex issues in Q4 2008, which some other managers had."
Merseyside Pension Fund is now in the process of redeeming its other fund of hedge fund investments, so as to switch the proceeds to PAAMCO by the year-end.
In addition to its increased mandate, PAAMCO will also take responsibility for conducting regular operations reviews of the pension fund's direct hedge fund investments, which were formerly managed in house.
Dowdall said: "Clearly, a global fund of fund provider has more resources than we do to monitor hedge fund systems. PAAMCO are a world-class firm with a superb investment approach, excellent performance and a research and due diligence process that meets the needs of institutional investors like ourselves."