Norfolk County Council Pension Fund, Norwich, England, selected four managers to form a preapproved panel to manage active currency hedging overlays linked to its £850 million ($1.3 billion) overseas equities exposure, said Alexander Younger, pension fund accountant for the £2.2 billion pension fund.
The fund's overseas equity allocation is largely passively hedged by its custodian, Northern Trust. “The implementation of the new mandates will replace that inflexible, passive hedging,” Mr. Younger said. “The emphasis here is on downside risk mitigation. We were particularly concerned about the management of drawdowns inherent in any passive hedging strategy.”
Final decisions have not been made about which managers initially will be funded, but Mr. Younger said two of the four managers likely will be appointed around June. He also added the fund does not plan to actively hedge all currency exposures, particularly in emerging markets. However, a significant portion of the exposures to developed market currencies such as the U.S. dollar, euro and yen will be included in the new active hedging strategy.
An RFI was issued in October; Hymans Robertson advised.