UK - The London Borough of Hillingdon has appointed State Street Global Advisors (SSgA) to run a passive multi-asset portfolio for its £504.3m (€599m) pension fund.
The council has confirmed SSgA will take responsibility for a passive portfolio of UK regional international equities and bonds, valued at £90m, after beating two other competing tenders on the basis of price.
Hillingdon initiated a search for the passive multi-asset manager in June, following a fall in assets of almost £30m in the last year and poor performance in the first quarter of 2008 which resulted in a negative return of -8.2%. (See earlier IPE article: Hillingdon shifts to passive investments)
The pension fund currently employs four external managers - Alliance Bernstein, Capital International, UBS and Goldman Sachs - to run its equity and fixed income portfolios, while UBS Property is responsible for real estate investments.
Hillingdon revealed in June the managers had been made aware of the need to change investment strategy, and James Lake, investment manager at Hillingdon, confirmed while none of the existing managers have been terminated, some active mandates had been reduced with the money transferred to the passive mandate.
Meanwhile, figures presented to the latest meeting of Hillingdon's pension fund committee showed the value of the fund fell from £526.1m to £504.3m in the second quarter, following a "lacklustre performance" from its investments.
Documents showed the pension fund lost 3.51% between March and June 2008, which it attributed to "poor UK stock selection by two of the largest managers, Capital International and UBS" as this "played a major role in the fund's poor performance for the quarter".
That said, Alliance Bernstein and Goldman Sachs also performed poorly in the second quarter, as Alliance generated a negative return of -1.97% because of "poor UK and North American stock selection", while it was claimed "asset allocation decisions were chiefly responsible" for the losses on Goldman's segregated fixed income investments.
The report revealed June had been the most "detrimental" month for the pension fund's results, bringing the negative return on investments for the first half of 2008 to -2.98% and the value of its assets to £504.3m.
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