UK – The 550 million-pound (818 million-euro) pension fund of household cleaning products company Reckitt Benckiser UK has awarded State Street Global Advisors a 50 million-pound (74.5 million-euro) enhanced indexing equity mandate.
State Street was chosen after the fund, advised by Watson Wyatt, allocated the money to enhanced indexing equities, explained the fund’s manager Kevin O’Berg.
O’Berg said State Street had been chosen among “three or four other” managers considered in the selection phase.
“Because there are several different products going on under ‘enhanced indexing’, we looked at the market to see which of those was the most appropriate,” O’Berg explained.
In 2002, as the fund was being restructured, the fund manager also said, the size of the mandate had been already “earmarked” for enhanced indexing.
Barclays Global Investors, the fund’s largest asset manager has managed the allocated sum while a new manager was found.
State Street is to join BGI, Capital International, Fidelity Pensions Management, Merrill lynch Investment Managers and Prudential M&G, which are already managing funds for the 1,000-member scheme, O’Berg said.
“As pension funds increasingly focus on risk budgets, enhanced indexation is becoming more widely used as an efficient method to capture modest but consistent returns in difficult market environments,” said State Street in a statement.
“The prospect of modest amounts of value under differing market conditions is finding favour with long-term investors,” said Kanesh Lakhani, head of European marketing and consultant relations at State street.
State Street won a 150 million-pound (224 million-euro) global enhanced indexing equity mandate from the copier company Xerox’s 2.3 billion-euro scheme in February.