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UK’s Bexley scheme eyes alternatives

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UK – The trustees of the £360m (€525.9m) Bexley Council Pension Fund will meet on Wednesday to decide whether to diversify the fund’s 60/40 equity/bond split by investing in hedge funds and private equity.

This move has been prompted by an asset liability study conducted by Mercer Investment Consulting – the fund’s adviser since approximately 1970.

“We want to inject more risk into the fund to help recover the deficit,” said council spokesperson Mike Ellsmore. The fund is currently 83% funded.

According to Ellsmore, the trustees may agree to a broad 70/30 split.

This will include 65% in equities with 36% in UK equities and 29% in overseas equities, and 30% in bonds. The remaining 5% will be split equally with a 2.5% investment in hedge funds and 2.5% ploughed into private equity.

The council will initiate the tendering process early next year if the trustees approve this shift in asset allocation, according to Ellsmore.

The fund’s two current asset management companies, UBS Global Asset Management (since 1982) and Newton Investment Management (since 1999), will also be able to participate in the tendering process.

At the start of November the Bexley Council Pension Fund won ‘best pension fund performance for UK equities’ for the third time at the Local Government Chronicle (LGC) Financial Awards.

This awards ceremony covers all the local authorities in the UK.

The award was judged on a rolling three-year UK equities performance, for which Bexley’s absolute combined fund return was 20.7% per year.

“This builds on the performance of the last two years and consolidates our position as one of the leading local authorities for pension fund investment,” said council director of finance and business services David Berry.

Council leader Chris Ball added: “Bexley has again been recognised at this top awards ceremony, which shows that the council continues to perform at a consistently high level.”

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