UK - One London borough, Brent, has appointed to private equity while another, Waltham Forest, has had its plans delayed until summer.
London Borough of Brent has made its first private equity investment. Brent’s £335m pension fund has invested £5m, or 1.5% of the fund, in the Capital Fund which is supported by the Department of Trade & Industry.
Head of investment and treasury management Martin Spriggs said the Corporation of London and the London Pension Fund Authority had also invested in the DTI fund.
He said Brent will be looking to invest in private equity more widely over the coming years, but no more than 5% of the entire fund, adding: “Public equity may not give us the same value of returns in the future.”
Spriggs said his fund is a mature one and prudence was needed in balancing long and short term aims.
Brent’s triennial valuation has shown an 84% funding level. As a result the employer is increasing contribution rates to 15.6% of employee pay in 2002, 16.2% in 2003 and then 18.6% in 2004.
The fund had its last ALS in 1999 and Spriggs said he said he doubted the scheme would have any changes of investment manager in the near future. The fund’s managers are currently Bank of Ireland Asset Management and Henderson Global Investors.
Spriggs partly blamed the deficit in funding on the Government’s withdrawal of tax relief on UK dividends in 1997.
At London Borough of Waltham Forest, group finance director Malcolm Smith also blamed his pension scheme’s funding level - shown by the triennial valuation to have improved to 92% from 91% last time - on the 1997 removal of dividend tax relief.
Waltham Forest is looking to invest up to £1m in private equity. The £300m pension fund was initially expected to appoint last year but the exercise was re-tendered in December following disappointing presentations from potential managers.
The search will now be concluded in June when the scheme will select one of two shortlisted opportunities.
At that time a full scale review of investment strategy will also begin, likely to take a year. Smith said manager changes will be discussed “as a result of the review and complying with Myners principles on benchmarks.”
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