A local council pension fund which had £28.5 million invested in Standard Life Global Absolute Return Strategies (Gars) has decided to divest from the fund, following a recommendation by consultant Allenbridge.
The sale of Gars comes as part of an overall strategy change for the Bromley council pension fund, which has decided to remove its allocation to diversified growth funds (DGF). The scheme also sold the Baillie Gifford Diversified Growth fund.
The total DGF portfolio was £77.8 million at 31 March, 8.2% of the overall fund value.
The decision to review the asset allocation strategy was due to a projected cash shortfall. In a letter, the chairman of the pension’s investment sub-committee Tony Owen, said member contributions and other cash inflows to the fund are currently insufficient to cover payment of benefits, other outflows and expenses.
The revised strategy was agreed by the committee, which besides removing DGFs, introduced allocations to multi-asset income and property funds instead. The fund also decided to reduce its global equities allocation.
The decision to divest comes hot on the heels of SLI announcing that it saw £2.8 billion outflows from Gars in the first quarter from the strategy.
Meanwhile, pension consultants Mercer, which advises other pension funds with positions in Gars, put the fund on a ‘watch’ rating last July.
In its latest update published in May, seen by Wealth Manager, Mercer maintained its ‘watch’ rating following the news of Standard Life and Aberdeen Asset Management merger.
Mercer said: ‘It is difficult to say what the longer term impacts of the merger will be until further details have been announced. We would expect limited impact on Gars, but clearly this is another challenge, and is a further reason for us maintaining a watch status on the strategy.’