The Lothian Pension Fund has brought a £300 million ($443 million) global equity mandate in-house as it continues to build its internal investment capabilities.
The transition was managed internally, a statement from the Scottish public pension said, switching £308 million from an Asian equity allocation—run by Invesco Perpetual and Baillie Gifford—to the global team.
“Trading took place across several time zones and market exposure risk was reduced by using futures contracts,” Lothian’s statement said. “The market conditions at the time were favourable and resulted in a much better outcome than expected in terms of market impact.”
The pension saved an estimated £200,000 in commission costs by managing the change in-house.
Lothian’s in-house management already runs £1.8 billion in listed equities in-house, according to its 2013/14 financial report, alongside nearly £1 billion in fixed income, private equity, commodities, and real assets.
The pension is in the process of obtaining permission from the UK’s Financial Conduct Authority to allow its internal team to use derivatives, develop investment strategies, and collaborate with other pension funds. Two subsidiary companies were set up by the City of Edinburgh Council last month, the pension said.
Lothian caters for public employees in Edinburgh and has £4.4 billion in assets according to its most recent valuation. Despite assets growing 26% since March 2011 the pension’s deficit increased from £142 million to £417 million. The increased deficit was down to falling bond yields and increasing longevity, the pension said.
The Lothian Pension Fund has been nominated for a CIO European Innovation Award in the Public Fund Below €15 billion category.
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