UK - Western Asset Management and Barclays Global Investors (BGI) have lost out in a major reshuffle at the £295m (€436m) Powys County Council Pension Fund that has seen overseas bonds culled from the portfolio.

Carl Leah, pensions accountant at the fund, said poor returns from foreign bond markets was behind the decision to cut the 10% allocation to zero.

US-based Western managed an overseas bond brief worth 8.1% of the total portfolio, or about £24m, while BGI's was worth 1.9%, or £5.6m.

In addition, the fund has made a foray into European real estate, awarding a £15m European (ex UK) property fund of funds mandate to CBRE Investors.

The allocation, which represents 5% of the total fund, builds on the existing 5% allocation to UK property, actively managed by Morley Fund Management.

Powys has also increased its exposure to overseas equities. Alliance Bernstein's £26m active overseas equities brief has been raised from 8.9% of the fund to 13.9%, or £30m, while BGI's passive UK equities brief has been increased by 1% to 17.8%, or £52.5m.

Western continues to manage domestic bond portfolios for Powys worth 21.9% of the fund, or £64m.

Leah said the changes came on the back of a liability study carried out by Watson Wyatt.

"We did a liability study which suggested we need to find new ways of diversifying," he told IPE.

"We recently invested in UK property so European property seemed like a natural progression. We had a large amount of our investments in bonds, so we are looking to have more exposure to return-seeking assets."

The multi-manager route to European real estate was selected for risk reduction purposes, he added.

As a result of the new emphasis on return seeking assets, the 50:50 split between return-seeking and liability matching assets has changed to 60% and 40% respectively.

Powys has also doubled a global tactical asset allocation overlay mandate run by Goldman Sachs to 2% of the fund.

The fund's asset allocation now stands at 20% UK equities, 25% overseas equities, 10% UK fixed interest gilts, 10% sterling non-gilts, 20% index-linked gilts, 10% property and 5% private equity.

 

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