LGPS pools award downside protection, China mandates

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Brunel Pension Partnership has launched a £1.2bn (€1.3bn) downside protection fund while fellow local authority pension asset pool Border to Coast has appointed two specialist China equity managers to supplement its existing emerging market fund.

JP Morgan, Lombard Odier Investment Management, UBS Asset Management and William Blair were chosen to run Brunel’s Diversifying Returns sub-fund, with the pool having received submissions from 102 managers to begin with.

Brunel said the most important feature of the new fund was to offer downside protection, in particular in times of market stress.

The strategies the £30bn pool has selected offer exposure to a wide range of risk premia via holdings in equity, credit, commodities, interest rates, currency, value, carry, momentum and quality risk premia.

Emily Booth, senior investment officer at Brunel, said managers had scope to tactically allocate amongst the strategies based on their relative attractiveness.

“The sub-fund has been designed to withstand phases of positive equity-bond correlation as well as damping drawdown when equities fall,” she said.

David Cox, head of listed markets at Brunel, said the fund was “proof that client needs can drive product innovation”.

“Although protection was the priority, the fund also needed to provide returns strong enough to meet future liabilities, whilst offering liquidity,” he said. “By targeting client outcomes in this way, we have ended up developing a more tailored product outcome.”

Liz Woodyard, investment manager at Avon Pension fund, one of Brunel’s clients, said it was “gratifying” to see the Diversifying Returns fund being launched given how it had been forged to meet client needs.

Border to Coast names China managers

Border to Coast has appointed UBS Asset Management and FountainCap Research and Investment (Hong Kong) as specialist China managers.

It expects to allocate £300-500m to the two managers, subject to market movements and the investment decisions of its 11 local government pension scheme owners.

The manager appointments anticipate a restructuring of Border to Coast’s existing internally-managed emerging market equity fund to allow for a China sleeve to complement the internally-run ex-China mandate.

Daniel Booth, Border to Coast’s CIO, said: “China is becoming increasingly important in the emerging markets benchmark, and we are very pleased to have selected two managers with local presence and specialist expertise to cover such a wide and diverse market.”

More than 50 managers applied for the specialist China mandate, according to Border to Coast. It said the two firms selected offered diversified exposure to themes such as technological innovation, growing middle class, and energy transition.

“UBS Asset Management has a long track record in selecting industry leaders with strong competitive advantages, whilst FountainCap utilises their coverage and local knowledge across China to uncover opportunities,” the pool said.