UK - Local authority manager-of-managers pioneer Wiltshire County Council is considering switching its entire £600m fund into the investment vehicle.
Northern Trust has been running 35% of the scheme’s equity allocation through its manager-of-managers product for the past year.
Wiltshire – the only UK local authority known to use manager-of-managers – is currently assessing Northern Trust’s performance as part of a “best value” review.
Corporate treasurer Mike Prince – who made the Northern Trust appointment in July 2002 – said: “I liked the idea of doing something different.
“With manager-of-managers we’re dealing with companies that we hadn’t been in touch with before. And it’s fairly clean. You are not worrying about what’s happening with manager selection – all you are concerned about is performance.”
Prince said the fund would consider upping its allocation if the results remain good – and perhaps let a manager-of-managers invest 100% of assets.
“If it works well I could be inclined to have them do all of the fund. If it works for 20% of the fund, and the advantage is that it makes investment clear and easy, why not go for it? It makes for a logical next step.”The Wiltshire Pension Fund is currently 70% invested in equities.
Baillie Gifford and Capital International both have equity mandates of £105m each. Northern Trust holds the remainder of £84m – about 20% of the total fund.
Local Authority Pension Fund Forum forum officer Keith Bray said there was no reason why a total move to manager-of-managers would not work.
“What Wiltshire has done is dipped its toe in the water, saying if the temperature is fine let’s get in. It is not jumping into an unknown lake in the middle of the Amazon.”
But he warned that using manager-of-managers can make the issue of corporate governance “a bit more complicated and convoluted.”
He also pointed out that unless a manager-of-manager can negotiate particularly good terms with the mangers it uses, schemes can be faced with two tiers of fees to pay.
*The Isle of Wight is currently considering the manager-of-managers option for its £156m fund. A decision will be made in 2004 when the scheme reviews its fund management arrangements.
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