Environment Agency Pension Funds eyes real asset multimanagers

Environment Agency Pension Funds, Bristol, England, is searching for up to three multimanagers to run £250 million ($401 million) in real assets, confirmed Howard Pearce, head of environmental finance and pension fund management at the £1.9 billion fund.

Those selected would have responsibility for fund selection, monitoring and performance reporting. Single-asset class managers will not be considered.

Environment Agency plans to diversify away from equity exposure over time to increase its real estate allocation to 6% from 5% currently, and by adding 4% allocations each in infrastructure and timberland/agriculture. The agency will look to invest in sustainable forms of these sectors, avoiding such areas as coal power generation, oil pipelines or refineries and deforestation.

Equity, now 63% of total assets, will be reduced to a target allocation of between 50% and 63%, according to a document Mr. Pearce provided.

Long-run return expectations for the real asset portfolio are between 400 basis points to 600 basis points over inflation, with lower risk than equities, according to the document.

The successful manager or managers would likely take over management of the agency's £60 million U.K. real estate funds portfolio, currently run by Aviva Investors, Mr. Pearce said in an e-mail.

Proposals are due Nov. 30. More information and the RFP are available from Sara Bushnell, head office contracting manager, at sara.bushnell@environment-agency.gov.uk.

Mercer is advising.