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Oxford appoints IFA and passive equity manager

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UK - Oxfordshire County Council has appointed Peter Davies as the independent financial adviser to its £913m (€1.04bn) local authority pension fund and awarded Legal & General Investment Management (LGIM) a 10-year specialist passive equity mandate.

Davies replaces A.F. Bushell as the pension fund's adviser after the council decided to re-tender the five year contract, valued at around £500,000, in May 2008. (See earlier IPE article: PPF appoints Capita for data cleansing)

An initial tender notice was published in June 2008 and a further notice was issued in October, and following a competitive tender process Davies beat 16 other applicants based on a range of criteria including pricing, experience of portfolio management and understanding of asset classes including private equity.

The latter requirement was particularly important as Oxford's pension fund has a private equity investment portfolio of a "dozen or so quoted private equity investment trusts" - about 7% of total assets - and the IFA is responsible for "managing these and dealing when necessary", although he will be assisted by UBS investment banking, which will provide research papers and access to analysts.

Other duties outlined by the council included providing views on the markets and its impact on the fund; and to comment on fund managers' strategies and performance as well as advise on overall investment policy and review the strategic asset allocation.

Oxfordshire Council has also appointed LGIM to run a £100m UK passive equity portfolio following the decision to transfer the UK equity portfolio managed by UBS to a passively managed index tracker in December 2007, following poor performance.

As the council did not have a contract with a company managing an index tracker portfolio, it temporarily transferred the equity portfolio to Legal & General in February 2008 until a manager was appointed, this followed the earlier decision to transfer a UK fixed interest portfolio, also managed by UBS, to LGIM. (See earlier IPE article: Oxford reviews TAA after poor performance)

However, following a tender process Oxford has confirmed it appointed LGIM over two other candidates to run the mandate as of 1 October 2008, although it revealed the £100m mandate "may be broadened at some future point". This leaves UBS to run an overseas equity portfolio and real estate investments.

Figures from the latest meeting of the pension fund committee at the end of 2008 revealed the pension deficit in the fund had increased from 22% at 31 March 2007 to 42% at 30 September 2008 as a result of the drop in value of its investment portfolio - estimated at 17% between April 2007 and October 2008.

The next valuation of the fund is scheduled for March 2010, and although committee members were told government plans to introduce cost-sharing may help fund some of the increased costs, "other aspects of the 2010 valuation will be dependent on decisions by the administering authority", on issues such as funding strategy.

In the report, Sue Scane, assistant chief executive and chief finance officer at Oxford Council, told committee members "key questions will be around the period set for the recovery of past service deficits, for which our Funding Strategy Statement currently sets a maximum of 25 years. This may well need to be extended to provide affordable increases in the employer contributions in respect of past service deficits".

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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