Latest Content » FEATURES & INTERVIEWS » Asset Allocation Panel

Property investment used to be a grimy business, difficult to break into and offering varying returns. Now, sophisticated products offer a more beaten track, writes Natasha de Terán.

Henry Smith reports on the Universities Superannuation Scheme’s decision to stick with equities.

The $51.7bn (€40bn) Pennsylvania Public School Employees’ Retirement System(PSERS) is boasting an investment return of 14.9 per cent for 2004. Chief investment officer Alan Van Noord puts this strong performance primarily down to the fund’s investments in real estate and other alternatives.

Bank//Pension, the Dkr9.9bn (€1.3bn) pension fund for a group of Danish financial companies, has added State Street Global Advisors to its asset manager line up, which is otherwise somewhat biased towards local fund managers.

MetallRente, the Berlin-based pension fund for Germany’s metal industry, is pioneering a new approach to risk management in its two-year-old €360m Anglo-Saxon-style scheme. The new pension scheme uses a “real-time stress test-based” technique to determine asset allocation.

Diversification is the governing principle at the UK’s Leicestershire County Council £1.5bn pension scheme. From its equity investments to its real estate portfolio, each of the scheme’s strategies is aimed at spreading bets, according to investment manager Colin Prat.

The Louisiana State Employees’ Retirement System demands that its investment strategy delivers a fairly formidable return of at least 4 per cent, every year, without fail. “Total fund return for Lasers shall consistently rank in the top half of an appropriate public fund universe”, proclaims the fund’s website – no mean feat in the current market conditions, but one that investment chief Bobby W Beale is determined to achieve.

Amonis, the ?695.5m pension fund for Belgian doctors, dentists and pharmacists, is planning a first-time investment in hedge funds amounting to 5 per cent of total assets.

Finance director Tom Mergaerts says the Brussels-based scheme is currently investigating four different hedge fund strategies – equity market neutral, fixed income arbitrage, convertible arbitrage and long/short equity.

PGGM is determined to stick to its bold investment strategy despite the imminent departure of its investment chief and the Dutch government threatening to force it to change its internal fund management team.

The Pensions Trust, a Ł2.3bn (E3.3bn) investment scheme for 4150 UK charities, has recently overhauled its asset allocation strategy in favour of a “liability-driven” method of money management.

The Irish National Pensions Reserve Fund (NPRF) is up 3.3 per cent for the year to date, despite a dip of -1.1 per cent in the third quarter of 2004.

The €10.7bn NPRF, established in April 2001 to provide partial funding of Ireland’s pension costs from 2025, returned 12.8 per cent last year.

The California State Teachers’ Retirement System (CalSTRS) announced in July its second consecutive year of positive performance with a 17.38 per cent return on investments for the 2003-04 financial year.

Christopher Ailman, CalSTRS chief investment officer, put the performance down to being overweight in US and non-US equity from the start of the year.

The Colorado Public Employee’s Retirement Association’s (Pera) asset allocation by market value is approximately 43 per cent domestic equity, 15 per cent international equity, 22 per cent fixed income, 10 per cent alternative assets, 8 per cent real estate, 1 per cent timber and 1 per cent cash. Two years ago, Colorado Pera conducted an asset/liability study which led the Board to establish its current asset allocation policy for the $29bn (€24bn) plan.

Mercer Consulting has revealed there will be a “significant increase in the number of schemes allocating to hedge funds in the next year” but they will not be joined by West Sussex County Council Pension Fund. It has decided against allocating any of its £966m (€1.4bn) pension fund to hedge funds for three reasons.

The Canada Pension Plan (CPP) Investment Board was set up in 1996 as an independent investment company to invest the funds not needed by the CPP to meet current pension payments. It also invests the proceeds from maturing bonds held by the CPP.

The Maryland State Retirement and Pension System (MSRPS) recently reported a 16.2 per cent return on investments for the 12 months to end-June, which boosted assets during the period by Ł3.5bn to Ł30.1bn.

The strong performance was led by equity returns of 23.1 per cent and returns on real estate in excess of 20 per cent.

Ossian Ekdahl, head of ALM studies at AP-Fonden, says pension provision in Sweden has moved from a traditional income-related defined benefit system, to two types of defined contribution systems, individual financial accounts (fully funded) and a pay-as-you-go system. The SKr139bn (e15.1bn) Forsta AP-fonden (AP1) is one of four buffer funds in the pay-as-you-go system.

Surrey County Council recently switched its entire Ł1bn (E1.5bn) pension fund portfolio from a balanced management to a core-satellite model. The move was the culmiznation of an asset liability modelling study carried out in late 2000 in conjunction with consultants, Watson Wyatt. Following the study, the fund changed to a customised benchmark of 75 per cent equities, 20 per cent bonds and 5 per cent property.