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EAPF hires Union Investment for sustainable equity mandate

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The Environment Agency Pension Fund (EAPF) has awarded Germany’s Union Investment a £90m (€126m) sustainable equity mandate, replacing an existing manager after 10 years.

The award comes nearly a year after the £2.7bn EAPF tendered an indefinitely renewable equity mandate that took into consideration a manager’s performance in both financial and non-financial matters.

While the tender allowed for up to £250m to be invested in the new mandates, Union’s £90m portfolio, combined with a previously announced £90m allocation to a long-term equity fund managed by Ownership Capital, means only £180m has been allocated.

In addition to Ownership and Union, Mirova Asset Management and Hermes Investment Management were appointed to a framework agreement, allowing the local government pension fund to appoint further managers at a later date.

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The four managers beat 56 other respondents, of which a dozen – eight large, established investment houses and four boutique managers – were eventually shortlisted.

Mark Mansley, CIO at the EAPF, told IPE he was not planning any further equity mandates in the near future and noted that the fund was reducing its equity exposure.

He said a decade-old mandate with Sarasin & Partners was terminated to fund the two new awards.

In a report detailing how it conducted the search, the EAPF said Sarasin had done well since it was appointed in 2005 but noted that the responsible investment market had “moved on significantly” since the initial award.

According to the scheme’s most recent annual report, the EAPF’s £164m stake in Sarasin’s fund returned 9% last year, 2.8 percentage points above benchmark, and 16.8% during the financial year ending March 2013.

The two awards form part of the EAPF’s efforts to invest 25% of the fund in sustainable investments.

Mansley said that, at present, it had exceeded the allocation, which stood at 26.3% and accounted for €703m at the end of March 2015.

The figure is up from March 2014, where £558m – or 24% – was allocated towards sustainable investments, boosted largely by the 2013 hire of Townsend Group to a global real assets portfolio.

For more on the EAPF’s evergreen mandate, read IPE’s interview with Mark Mansley and Faith Ward

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