UK - Shropshire County Council pension scheme has hired Mercer Investment Consulting to assist with its move into hedge funds.
Earlier this year, the fund announced it would introduce an allocation of 10% of the 550 million-pound (777 million euro) scheme to hedge funds. Indeed, in the summer a 55 million-pound (77.7 million euro) hedge fund of funds mandate was put out to tender.
Mercer has now been appointed to advise on the selection of the manager and to assist with ongoing monitoring of the appointed manager, which is expected to commence on January 1 2004.
Phil Guy, head of Treasury & Pensions at the local authority, said: "The fund is looking to make an investment in hedge funds to give further diversification to our investment structure and, although the Shropshire Fund is one of the best funded local authority schemes, we want to reduce the risk of further deterioration in our funding level from market falls.
“We are making a significant allocation to hedge funds because we believe that only a meaningful amount will have a noticeable effect on total returns. We have chosen to use a fund of funds approach because it typically provides a diversified portfolio, and a fund of hedge funds manager brings professional hedge fund selection, portfolio management and monitoring."
Following the Myners Report and depressed returns from equities, UK pension funds are increasingly considering alternative investments.
Says Robert Howie, senior investment consultant and lead hedge fund researcher at Mercer: "The returns generated by the sophisticated active strategies of hedge funds are attractive to a number of funds, especially when they also offer some diversification from the more traditional sources of return such as equities."
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