Merseyside puts RI at heart of new £500m emerging markets mandate tenders

Managers will have to demonstrate understanding of ESG and governance in investment.

The £4.2bn Merseyside Pension Fund has placed responsible investment criteria at the heart of £500m ($807m) in assets run in three mandates for Japanese, Pacific Basin and emerging markets equities that it is putting out to tender. The incumbent manager, Nomura Asset Management, has run all three portfolios since 2003 and is expected to re-apply. The pension fund said it re-tenders for all mandates after its maximum seven-year tenure. It said adverts for the mandates will be placed in the Official Journal of the European Union (OJEU) on February 5th. Merseyside Pension Fund is a signatory to the UN Principles for Responsible Investment (UNPRI) and endorses the Institutional Shareholders Committee (ISC) code on the responsibilities of institutional investors. It said fund managers will have to demonstrate a commitment to the integration of environmental, social and governance issues in investment to be hired. The fund includes ESG in its manager search as a hiring hurdle alongside past investment performance, internal resources and the fund manager’s general investment approach. Nomura Asset Management is not a signatory to the UNPRI. Peter Wallach, head of Merseyside Pension Fund, said: “Responsible investment is at the core of our investment philosophy. We do not think an SRI product would be suitable for these mandates, but we would prefer to work with investment managers who understand the significance of ESG factors to long-term investment performance, as well as the responsibilities of share ownership.”Wallach added: “We are obliged under EU law to conduct formal reviews, at intervals, of all of the fund’s contractual arrangements. However, we do not see this as burdensome, but rather as an exciting opportunity to test the market to ensure that we are securing best value, as well as keeping our long-term investment strategy on track. This exercise certainly should not be seen as a reflection on Nomura’s performance and I should point out that 7 years is the maximum length for which we will allow a contract to run.”
JLT Benefit Solutions is assisting the Merseyside fund with the search. Dave Lyons, divisional director at JLT, said, “Although the Merseyside Fund’s investments in this region are currently run by a single manager, this could be a potentially great opportunity for boutique managers to demonstrate their credentials alongside the more established names in this arena, and we look forward to seeing great diversity amongst the respondents to the tender process. Fund managers can submit proposals to participate in one, two or all three lots, as appropriate to their individual areas of expertise.” The tender is being overseen by Wirral Council, one of the constituent local authorities covered by the Merseyside pension scheme.
Fund managers seeking to pitch for the mandates can register in advance with Wirral’s online procurement portal, The Chest: Link to The Chest

Owen Thorne, Investment Officer at The Merseyside Pension Fund will be speaking at RI’s forthcoming Sustainable Emerging Markets conference in London on March 3rd.
Link to programme