London Borough of Sutton Pension Fund is searching for at least one active multiasset absolute-return manager to run up to £75 million ($122 million) and at least one active unconstrained global equity manager to run up to £70 million, said Anthony Reeves, chief accountant.
The search follows a strategic asset allocation review by Hymans Robertson, the £350 million plan's investment consultant. The plan's allocation to global equities was cut to 55% from 70%.
The move was made to diversify away from global equities and to “create a more stable return,” Mr. Reeves said. It will be the plan's first multiasset absolute-return mandate. Managers are expected to outperform three-month cash rates by at least three percentage points annually over rolling three- to five-year periods. Hedge fund strategies will not be considered.
This is also the plan's first unconstrained global equity mandate. The unconstrained approach was adopted to provide additional returns, Mr. Reeves said. Managers are expected to outperform the MSCI All Country World index by at least three percentage points per year.
In both searches, the plan is seeking to establish “framework agreements” with a pool of managers from which it will fund mandates over the next four years. The approach gives the plan flexibility in replacing managers over the term of the agreement without having to conduct a new search, Mr. Reeves said.
Funding for the new strategies will come from active global equity managers Newton Investment Management, which now runs £130 million, and passive global equity manager Legal & General Investment Management, which handles £110 million. The amount of actual reductions has not been determined, Mr. Reeves said.
Proposals for the multiasset and global equities searches are due Aug. 22, with selections expected by the end of the year. Further information is available by sending an e-mail to Hymans Robertson at [email protected] for multiasset and to [email protected] for global equity.
Hymans Robertson also recommended a new allocation of 5% of total assets to infrastructure. A search for an infrastructure manager will be held, but is has not been scheduled. Funding will come from reducing the plan's bond allocation to 15% from 20%. The remaining 10% of the fund is in real estate.
