Switzerland-based alternatives investment manager LGT Capital Partners has won a £280m multi‐alternatives mandate from the UK’s Hertfordshire County Council (HCC), a move that comes as the local authority looks to diversify its assets beyond equities.
The mandate will provide HCC with an actively managed portfolio of nine alternative asset classes and the convenience of a single reporting solution for alternative investments, according to LGT CEO Roberto Paganoni.
It is one of the largest mandates focused exclusively on alternative investments ever awarded by a UK local authority pension fund, and includes hedge funds, commodities, insurance‐linked securities, property and private equity.
Although financial terms of the deal were not disclosed, a source familiar with the matter said management fees for such mandates tend to be below one per cent, or anything between 30 and 75 per cent basis points.
The move follows a review in January 2011 of HCC’s investment strategy by an investment sub-committee that decided the fund needed to diversify its assets beyond equities, which accounted for around 80 per cent of its £2.4bn portfolio at the time.
Following the review, HCC appointed Legal & General Investment Management to run £300m in passive and liability-driven investments, and dismissed Alliance Bernstein, one of its equity managers, before procuring LGT to manage a portfolio of alternative investments.
“The committee felt there was too much emphasis on equities, and we weren’t looking at some of the more exotic asset classes such as hedge funds, infrastructure and timber,” Patrick Towey, group manager, specialist accounting at HCC, told AltAssets.
“We were looking for a manager that could give us some of that diversity, including commodities and property, and LGT fit the bill.”
The mandate is part of a multi‐alternatives offering especially designed by LGT in 2011 for pension funds such as UK local authorities, which have historically faced difficulties in accessing alternative investments due to a lack of resources.
The Swiss firm also manages money on behalf of the London Pension Fund Authority and the Pension Protection Fund, which are two of a handful of UK authorities that have increased their exposure to alternative assets in recent years.
Greater Manchester Pension Fund has also been increasing its exposure to private equity and infrastructure in recent years, while the University Superannuation Scheme, an established alternatives investor, has separate accounts managed by firms including Neuberger Berman and Pantheon.
HCC currently invests about five per cent of its assets in private equity through separate accounts with SL Capital and HarbourVest Partners, which manage a total of about $130m on behalf of the pension fund.
HCC counts Mercer and Hyman Robertson among its investment consultants.
LGT Capital Partners did not respond to a request for further comment.
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