Merseyside awards equity roles and moves fixed income
UK - Merseyside Pension Fund has appointed four new investment managers to run a third of the £3.7bn (€4.1bn) scheme's allocation to UK equities, ahead of plans to start a new search for active fixed income managers.
Following a tender process, in which it was advised by bfinance, Merseyside has awarded a UK equities contract of approximately £360m, split equally between M&G, BlackRock, Newton, and TT International.
Merseyside initiated a search for between two to five UK equity managers in May 2008, partly to take over responsibility of the assets previously run by Barclays Global Investors (BGI) before it was terminated in December 2007. (See earlier IPE article: Merseyside seeks UK 130/30 managers)
As part of the process Merseyside reviewed UK unconstrained equity managers, 130/30 managers and portable alpha approaches to the contract but eventually decided to appoint long-only managers "in order to generate the returns required in the current market environment".
UK equities currently make up around 30% of the £3.7bn fund, and two-thirds of the allocation will continue to be managed by the fund's in-house team and in the Legal & General Index Fund.
That said, it pointed out the assets managed by Legal & General will reduce slightly as it has been acting as a transition manager and holding the assets formerly managed by BGI since December 2007.
Peter Wallach, head of Merseyside Pension Fund, said: "The appointment of four active unconstrained managers to run a third of the fund's allocation to UK equities is consistent with our investment strategy; focusing not just on asset allocation, but also diversification and suitable apportionment of risk."
Each manager will run a portfolio of approximately £90m, as Wallach said the pension fund believed it had appointed managers "with proven, diverse yet complementary approaches to long-only equity investment".
Meanwhile, documents from recent meetings of Wirral Council's pension committee revealed the procurement process for a European equities managers has been awarded to Unigestion - an independent asset management company chaired by Bernard Sabrier - subject to due diligence.
The pension fund started a search for a European equities manager for a portfolio then estimated at £135m, in June 2008, following a decision in November 2007 to increase its investment in European equities to 10% of the overall 29% overseas equity allocation. (See earlier IPE article: Merseyside tenders European equities mandate)
In addition, members of the pensions committee were last week recommended they start a tender process for fixed income managers, as part of a scheduled review of the mandates taking place this year.
A report prepared for the committee revealed the pension fund has an 8% allocation to active fixed income assets and currently employs Schroders and Legal & General to manage these assets, which are "two parallel mandates with a benchmark of 50% UK government bonds and 50% corporate bonds and an out performance target of 1% per annum on a three-year rolling basis."
Committee members were told Hymans Robertson had been selected from the 'framework' of consultants to advise on this specific tender process "as they had the better understanding of requirements and quoted the lowest fee", of £40,000.
The formal tender notice - expected to be published by the Official Journal of the European Union (OJEU) by 30 January 2009 - will "focus on identifying firms that are of sufficient size, financial and regulatory standing to run this mandate and can demonstrate an ability to achieve investment targets".
Once the tender process has been officially started the council predicts it will last approximately six months with the final appointment of active fixed income managers expected in June 2009.
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