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Pensions

Worcestershire awards £1.2bn mandate

Worcestershire awards £1.2bn mandate

Mona Dohle
Wednesday 2nd May 2018

Worcestershire Country Council Pension Fund has awarded a £1.2bn structured equity mandate to River and Mecantile Derivatives to add downside protection to its equity portfolio.

The local authority pension fund, which by the end of 2017 managed £2.4bn of assets, said that moving from equities to other asset classes would have reduced return expectations , which is why it is now hedging its passive UK, US and European equity investments.

Sue Alexander, the scheme’s chief financial officer, explains: “Our research determined that a static options equity protection strategy would be the most suitable for the fund, representing better value than an active solution, and would be more straightforward to implement.”

Masroor Ahmad, managing director of River and Mercantile Derivatives, adds: “Following the extended period of positive returns in equity markets to the beginning of this year, we have seen an increasing number of local government pension schemes interested in our market leading derivative capabilities to manage the downside exposure in their portfolios while maintaining their allocation to equities.”

Since the introduction of Local Government Pension Scheme regulations in 2016, local authority pension funds have been explicitly permitted to invest in derivatives. Last week, Cumbria County Council Pension Fund announced a £1.1bn equity protection strategy, while the London Borough of Islington Pension Fund confirmed a similar approach last year.

 

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