UK – The 9.2 billion-pound (13 billion-euro) British Coal staff superannuation scheme has announced a new investment structure and new managers, with the aim of using its risk budget to best effect.
The new structure is divided into three sections - a passive layer, a low risk core layer and a satellite layer. The passive and core layers will each be around 33% of the schemes’ assets while the satellite layer will be some 20% with the balance in property and private equity. The strategic asset allocation is being kept at 70% in equities, 15% in bonds, 10% in property and five percent in private equity.
The passive mandate has been awarded to Barclays Global Investors.
There are four core mandates - fundamental global equities, quantitative global equities and UK bonds - have been awarded to Goldman Sachs Asset Management International. The fourth core mandate, quantitative global equities, has been awarded to BGI.
The satellite layer, which seeks outperformance of around three percent per annum is to be managed by Schroders (UK small cap), First State (emerging markets), Nordea (global equities – growth) and Alliance Bernstein (global equities – value). The UK small cap mandate was previously managed by Schroders, Fidelity and Edinburgh Fund Managers.
In addition to these, the scheme’s sterling cash continues to be managed by Insight (formerly by Rothschild), and the property portfolio by LaSalle Investment Management.
The private equity portfolio, which is being diversified by stage and geography, now comprises eight managers of whom the largest continues to be Cinven.
The investment consulting team was led by Nick Watts of Watson Wyatt, which advised the trustees on the structure to be adopted, the selection of individual managers and the precise terms of the mandates. David Hager of Hewitt Bacon & Woodrow advised the scheme’s guarantor, the Department of Trade and Industry.
Commenting on the new structure, chief executive David Morgan said that “the objective was to ensure that the scheme’s risk budget was used to best effect and the combination of managers with different styles and low correlations would help the trustees in their search for better returns at the same or lower risk levels”.
The scheme announced in June that changes were being made. Previously Goldman Sachs Asset Management ran around 80% of the fund, but the trustees decided to diversify the management of its assets to a broader number of asset managers "thereby reducing any single manager risk".
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