UK Contest Winner Proposes Dynamic Benchmark Plan

October 16, 2003 (PLANSPONSOR.com) - Henderson Global Investors, a London-based investment house owned by AMP, of Australia, walked away with a win at a UK contest to find the best approach for running a portfolio in a socially responsible long-term way

Henderson edged out 88 entrants in the contest cosponsored by Universities Superannuation Scheme and Hewitt Bacon & Woodrow, according to an IPE report. The competition asked entrants to respond to an imaginary30-billion mandate (See  Winner of UK Investment Contest to be Picked Wednesday ).Henderson’s objective was to grow the mandate “at a rate above that required to meet all future liabilities, without taking undue risk”.

Henderson proposed a dynamic benchmark approach and to dividethe portfolio into two: a € 25 billion “core portfolio” with 50% in equities, 20% each in bonds and property, and 10% in private equity; and €5 billion “added value portfolio” that would “harvest alpha” through a series of absolute return sub-funds.

The proposal called for a specially made benchmark. “Monitoring achievement against the fund’s principal objective will require the construction of a tailored benchmark for the overall fund. This should incorporate a rolling record of liability assumptions, together with a similar record of investment assumptions,” Henderson’s proposal said. “This will result in the fund benchmark itself being dynamic. The performance of the total fund will be measured annually and will be analyzed relative to the benchmark over rolling periods – both medium and longer term.”

The other two money managers on the short list were Schroder Investment Management and Sustainable Forest Systems. There were five non-corporate entries.

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