UK - The £360m Bexley Council pension fund is considering re-jigging its asset allocation with first-time allocations to private equity and hedge funds on the back of its latest asset liability study.
The pension fund, which currently allocates 60% to equities and 40% to bonds, is planning to invest 2.5% or about 9m in both private equity and hedge funds, said Mike Ellsmore (pictured), assistant director of finance at Bexley Council.
Bexley would likely take the fund of hedge fund route, he added.
The moves are part of a proposal being put to the trustees that form the fund’s pension committee and would mean a 5% increase in the fund’s equity allocation and a 10% reduction in the bond portion of the portfolio.
Ellsmore said Bexley wanted to increase the risk in the portfolio, with the hope that this would improve the fund’s 83% funding level over the long term.
“We think as a public authority we can take a long term view of the financial market,” he said. “We can afford to be in equity and run the ups and downs of it.”
The scheme plans to tender for managers in the new specialist asset classes shortly but will maintain UBS Asset Management and Newton Investment Management for its balanced mandates.
Regarding the trustees possible reaction to the proposal, Ellsmore said: “[Hedge funds] is a new area for us and I think the trustees will want to talk about the timing of it and whether hedge funds are the right vehicle to add risk to the portfolio.
“Taking a 20 year view as a public body we don't have to worry about balance sheets and share prices. We can be a little more circumspect about volatility than the private sector.”
The fund is advised by Mercer Investment Consulting.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.