UK - Britain's largest local authority pension scheme, the £11.4bn (€13.6bn) Strathclyde, is to invest more than half a billion pounds in a fundamental indexation equity mandate, re-allocating assets from its passive equity holdings.
The four-year framework agreement being overseen by Hymans Robertson's Glasgow office expects to appoint as many as eight potential managers to a "non market-cap weighted, rules-based" global equity index.
The fund's administering authority, Glasgow City Council, also said the framework would be made available to other Scottish local government pension schemes (LGPS), coming weeks after seven English local authorities published details of investment consulting and custodian frameworks open to all of the UK's 100 local authority funds.
The tender further asks for the portfolio to cover "as broad a spread of size, industry and geography as possible" and suggests it should have a similar breadth and depth as the MSCI All Countries World index.
"Constituent weightings in the tracked index should be, wholly or substantially, determined by fundamental accounting values," the local authority's tender added.
Glasgow City Council said the estimated £550m mandate could be altered in size and coverage prior to award, as well as once one or several managers had been selected.
Discussing the tender in the upcoming issue of IPE, Strathclyde head of pensions Richard McIndoe explained the fund's motivation behind the mandate, noting that it would shrink its passive equity holdings by 5 percentage points to 37.5%.
"Fundamental indexation is a genuine variant on passive, whereas most of the other alternative-weighting schemes, including minimum variance, are really quant-active," he said.
McIndoe explained that Strathclyde had previously experimented with a quant portfolio overseen by Invesco, but that the mandate "didn't really work out" and that, despite the structural differences between minimum variance and quant, the experience with Invesco had "soured" the overall approach for the fund.
Meanwhile, Strathclyde is also tendering for a global custodian.
The five-year tender comes as Northern Trust's current contract as scheme custodian ends.
Interested parties have until 26 November to apply through Hymans Robertson for both tenders.
The Scotland-wide investment management framework comes shortly after Norfolk Pension Fund head Nicola Mark suggested that such open frameworks would not be viable for asset management tenders.
Explaining why she doubted investment management frameworks would be successful, Mark said: "The products are fluid, the investment managers themselves are very fluid. It's very difficult in that area, and I don't know how long it would have any credibility."
For more on Strathclyde's investment strategy and the national framework, see the upcoming November issue of IPE and the 'Risk-managed equities' supplement.
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