UK - UBS Global Asset Management and Fidelity International, currently managing the London Borough of Ealing's £500m pension fund are under scrutiny.
It follows concerns by the scheme's adviser Mercer Investment Consulting about the amount of risk that was being built into the portfolio.
At the last pension fund panel meeting in May it was revealed that Fidelity had underperformed over the previous quarter, although the last year showed outperformance. UBS had underperformed over the previous 12 months.
Mercer conceded that the underperformance was due to a general downturn in UK equities but it felt that the level of performance was made unpredictable by the built-in risk.
Now, the council splits its global balanced mandate into three specialised mandates and is tendering for fund managers.
The £500m in total assets will be divided into UK equity representing (42% of the total), global equity (33%) and UK fixed corporate bonds (25%) from late February 2007.
Paul Audu, investments manager of the pension fund, told IPE that the tender was put out "following a review of the pension fund's asset management by the authorities".
"It has nothing to do with dissatisfaction in UBS's or Fidelity's services." Neither UBS nor Fidelity were available for comment.
The 6,400-member pension fund had grown 5.1% over the last quarter and 24.1% over the last year as per May 2006. Under the £209m UK equity and the £165m global equity mandates the gross out performance target is set to +2.0% a year over rolling three-year periods.
For the £125m UK corporate bonds mandate this target is set to +1% p.a.
Contracts offered are unlimited but subject to three-year reviews. The deadline for receipt of tenders or requests to participate is October 2.
Elsewhere, Fidelity International has published a survey showing that local authorities are still using fixed income products primarily for diversification from their portfolios rather than to generate return or match liabilities.
Ninety percent of local authorities have fixed income assets in their portfolios with 48% allocating up to 20% of their total scheme to fixed income.