UK - Henderson Global Investors (HGI) have lost approximately £1bn in mandates after the £3bn London Pension Fund Authority (LPFA) reviewed its investment strategy.
The LPFA board announced a marked shift away from its traditional bond/equity structure, where HGI had the bulk of their mandates, to one more closely aligned with it liabilities and cash flow requirements.
After conducting a review in 2004, the LFPA discovered they had a funding deficit in their Larger Active Sub-Fund of 26 % and 9% in their Pensioner Sub-Fund.
In a measure to reduce these liabilities and cope with falling fund levels exacerbated by the recent equity crash and low bond yields, the LPFA said it would take a more aggressive approach to seeking returns. It said it would manage risk by diversification of its portfolio and the introduction of a currency overlay manager.
HGI, which had a benchmarked global equity mandate and 2 benchmarked global bond mandates with the London fund, were unable to sustain any business with the fund in the transition.
LPFAs chief executive Peter Scales said: “We wanted to get away from traditional global equity and bond mandates on bespoke benchmarks. So we introduced something completely different and tendered that. Henderson bid for it, as did Legal and General but weren’t successful at the end of the day.”
Scales confirmed that: “Yes the mandates have disappeared and we weren’t able to keep them on for the new ones. Henderson have lost every existing mandate. They were holding about a £1bn.”
“The sort of mandates we were holding were not performing very well because of the markets but principally because we wanted something more aggressive and wanted to get away from these benchmarks and wanted to move into things like targeted returns which are different,” Scaled added.
The £1.8bn active sub-fund is to shift from 75% global equity, 10% global bonds and 15% other setting to 65% global equity with 20% in target and 15% in other assets.
Goldman Sachs Asset Management maintained a stake in global equity, while MFS and Newton Asset Management won fresh unconstrained global equity mandates.
A spokesman for HGI confirmed the news and said: “Yes its a shame to lose the business but we feel we have the expertise to cope with the loss. We potentially have a lot of new business coming up for more specialist mandates.”
The new strategy comes into effect on the 1st January 2006
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