UK - Surrey County Council is expected to issue a tender for a new investment adviser in the next few months after Watson Wyatt confirmed it is withdrawing from the local authority pension fund investment consultancy market. 

In the latest committee meeting on the £1.9bn (€2.4bn) local authority pension fund, council members highlighted the Investment Advisers Group (IAG) had been advised its contract for investment advice - provided by Watson Wyatt - had never been reviewed.

As a result, it was noted in September 2007 the review process would take place following the completion of the evaluation of the scheme's investment management arrangements.

However, in the February committee meeting members were told Watson Wyatt would not be participating in the tender process as "it had decided to withdraw from the local authority investment consultancy market". 

The committee confirmed a request to start the search for a new investment adviser would therefore be taken to Surrey council's Procurement Review Group (PRG) in March, and until the appointment of a new adviser Watson Wyatt had agreed to provide "ad hoc advice to officers", which would focus solely on manager rating changes.

Watson Wyatt confirmed to IPE it is withdrawing from the local authority investment consultancy market, but claimed the change is simply the "end of a trend which started four or five years ago".

The consulting firm pulled out of the local authority actuarial market in April 2003 as it claimed work with local authorities had been declining in recent years, so it only represented around 1% or £1m of its annual turnover. (See earlier story: Watson quits UK local authority actuarial market)

At the time, the firm said it would continue to provide investment advice and other consulting services to the local authority pension funds, however Watson Wyatt told IPE the amount of investment work has become "less and less" over the last five years.

Paul Deane-Williams, spokesman for Watson Wyatt, said: "This has been winding down over the last few years, as gradually relationships have come to an end and we have just not re-tendered."

He said the firm had withdrawn from the local authority market, initially on the actuarial side, because it was becoming an increasingly specialised market, which needed dedicated resources to add value.

As the firm didn't have that specialist focus, Deane-Williams said it decided the best thing was to withdraw from the market, so "at the end of a long period of winding down" the company only has a "handful" of local authority clients left on the investment side.

In addition, documents from Surrey's February committee meeting also confirmed recent changes to the scheme's investment portfolio, including the termination of Schroders' £55.8m European equity mandate at the end of November 2007.

The quarterly pension report revealed the committee had still not decided whether to tender for a new manager but confirmed the assets previously run by Schroders had been transferred to Legal & General Investment Managers (LGIM) to be managed on a passive basis.

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