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Merseyside tenders for transition manager panel

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  • Merseyside tenders for transition manager panel

UK - Merseyside Pension Fund has issued a tender to establish a framework list of transition managers who would aid the movement of assets between investment managers following strategy changes.

The £3.7bn (€4.1bn) Merseyside pension scheme previously employed Legal & General Investment Management (LGIM) - which also runs an active bond mandate and passive pooled assets - as a transition manager.

This deal included placing the assets formerly managed by Barclays Global Investors (BGI) with LGIM until new managers were appointed earlier this month. (See earlier IPE article: Merseyside awards equity roles and moves fixed income)

However, the Wirral Council pension committee were told in November there are a number of situations where the Merseyside pension fund would need to move "substantial assets" between investment managers including:

Changing managers when a contract expires and is not renewed; Dismissal of managers for performance reasons, and Changes in the overall asset allocation of the fund.

It admitted these moves can result in "significant transaction costs" and suggested specialist transition managers could insure these are kept to a minimum, as although the LGIM model had "worked well" in the movement of diversified bond and equity portfolios held on a passive basis of six months or more, it is not appropriate for assets which will not be held passively, such as "any moves in fixed income due in 2009".

Wirral Council, advised by Hewitt Associates, is now seeking to establish a four-year framework agreement of a maximum of six transition managers to help "manage the movement of assets relating to planned and future changes in the investment arrangements of the Merseyside pension fund".

The council confirmed it would review various aspects of the pension investment strategy in the next four years and "expects to make changes to its strategic asset allocation, and also its stable of investment managers".

Once the framework agreement is in place, and the council has a list of transition managers, Wirral said it "will conduct a mini-competition exercise between providers whenever it requires transition management services".

That said, the pension fund committee was told "it is anticipated LGIM would be used for the transition of UK and European equities following completion of the current procurement exercises as these assets are under their management at present and therefore this will be the most cost effective solution".

The search for a series of transition mangers follows the recent appointment of four active UK equity managers to take on the investment of the £360m run by BGI, and comes ahead of the expected tender for fixed income managers.

The closing date for applications to tender for the transition management role is 16 March 2009.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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