Merseyside increases focus on ESG for emerging markets
UK - Merseyside pension fund is re-tendering £500m (€576m) of Far East and emerging market equity mandates, but has indicated its preference for managers with a clear socially-responsible investment (SRI) focus.
The three existing equity mandates for Japan, the Pacific Basin and emerging markets have been run by Nomura Asset Management since 2003. However, as seven years is the maximum length, Wirral Council will allow a contract to run the portfolios are being re-tendered with Nomura expected to reapply.
Moreover, the £4.2bn Merseyside pension fund confirmed it is "explicitly including in the search criteria indicating a preference for managers that show a willingness for SRI".
The council noted the pension fund is already signed up to the UN Principles for Responsible Investment (UN PRI) and endorses the Institutional Shareholders Committee (ISC) code on Responsibilities of Institutional Investors - to be used as a basis for the Stewardship Code.
This will therefore be "one of the factors to be considered alongside past performance, resources and general approach".
Peter Wallach, head of Merseyside pension fund, said: "Responsible investment is at the core of our investment policy. We do not think an SRI product would be suitable for these mandates, but we would prefer to work with investment managers who understand the significance of ESG factors to long-term investment performance, as well as the responsibilities of share ownership".
The pension fund was keen to stress the focus on SRI is not the reason for the re-tendering, more that as it is obliged to review contracts under EU law it took the opportunity to highlight its preference for a manager with an SRI approach.
Although the tender will not be issued on the European tender database until 5 February 2010, Merseyside explained the electronic system it is using for the selection process requires applicants to pre-register so it is highlighting the search ahead of time through its appointed consultants JLT Benefit Solutions.
Dave Lyons, divisional director at JLT Benefit Solutions, said: "Although the Merseyside fund's investments in this region are currently run by a single manager, this could be a potentially great opportunity for boutique managers to demonstrate their credentials alongside the more established names in this arena, and we look forward to seeing great diversity amongst the respondents."
The pension fund said further immediate changes are not expected to the asset allocation as it is currently focusing on the next triennial actuarial valuation of the fund at 31 March 2010. That said, once this process is completed it might begin a review of its investment strategy, and a couple of mandates may be re-tendered towards the end of the year ahead of their expiry date.
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