Brunel Pension Partnership, which invests money for ten UK local authorities, has created a “diversified returns” multi-manager fund for its pension scheme clients.
Brunel has created the £1.2 billion Diversifying Returns fund so that its pension clients have “meaningfully different exposures” to others in their strategic asset allocations.
William Blair, Lombard Odier Investment Management, UBS Asset Management and JP Morgan Asset Management were chosen for the fund from 102 managers who made submissions.
The most important feature of the new fund is to offer downside protection, especially in times of market stress, Brunel said. It does this by acting as a stabiliser when returns in other portfolios come under pressure.
Emily Booth, senior investment officer, said the selected strategies offer exposure to traditional and alternative risk premia and that managers have scope to tactically allocate amongst them.
She added: “The sub-fund has been designed to withstand phases of positive equity-bond correlation as well as damping drawdown when equities fall.”
Liz Woodyard, investment manager at one of the pension funds clients, the Avon Pension fund, said: “It’s gratifying to see the DRF being launched, as it reflects our desire for a fund that offers protective diversification within our investment strategy. However, we also wanted a fund that has the potential to provide equity-like returns and is relatively liquid.”
The fund targets “reasonable levels of absolute volatility”, at below 10%, and uses the Sterling Overnight Index Average as its benchmark. It aims to beat this risk-free rate by 3-5% per annum.
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