Border to Coast to appoint China specialist for Emerging Markets Fund

Border to Coast Pensions Partnership (“Border to Coast”), one of the largest public sector pension pools in the UK, is seeking to appoint a specialist China equity manager to supplement its existing Emerging Market Equity Fund.  The fund, which is currently wholly managed internally, is expected to allocate around a third of its assets to the specialist China manager – a total external mandate size of around £200-300m.

Following consultation with its Partner Funds, Border to Coast is seeking to create two separate sleeves within its Emerging Market Equity Fund – one for China (to be benchmarked to FTSE Total China Index) while the internally managed sleeve will use FTSE Emerging Markets (excluding China) as its benchmark.

Daniel Booth, Chief Investment Officer at Border to Coast said, “With the increasing weight of China in the Emerging Markets benchmark, reflecting trends in the wider market, we felt it was appropriate to seek a specialist partner who will provide us with a local market presence.”

The Emerging Market Equity Fund was launched in October 2018 with £600m.  Following a period of restructuring post the launch of the fund, it has outperformed its benchmark by 0.5% in the 15 months to 31 March 2020.

Due to Covid-19 travel restrictions, Border to Coast has produced an online presentation for managers interested in bidding for the specialist China mandate.  This provides the background and selection process and can be found at https://www.bordertocoast.org.uk/china-equity-manager-procurement/

The formal tender process for up to two managers will be launched on Monday 4 May and managers are likely to be appointed in Q3 2020.  The Border to Coast process is being supported by Mercer; any queries from managers should be directed to bordertocoast@mercer.com.

 

FAQs

How do we register interest and access the ITT documents?

The ITT, along with all other documents relevant for submission, will be available from bordertocoast@mercer.com. Please email this address to register interest and Mercer will ensure any documentation is provided.

Does our strategy have to be benchmarked to FTSE Total China to apply?

We are happy to consider strategies that have an investment universe covering the entire China Equity universe (including H, A, ADRs etc). As long as the representative track record can exhibit a commitment to investment in all China Equities regardless of listing location, it will be applicable for the Tender. Using a FTSE Total China Connect Index isn’t a hard criteria as we appreciate other benchmarks cover a similar universe.

Please could you confirm how the £500m minimum AUM criteria will be calculated?

We are willing to consider aggregate AUM in China Equities managed by the same portfolio management team proposed in the Tender. Aggregation of AUM from Chinese positions held elsewhere in a Firm is not appropriate.

Can we use a carve-out of our China track record from an Emerging Markets/Asia ex Japan product?

We do not see a China carve out from a strategy with more global coverage as an appropriate method to demonstrate an ability to manage China Equities against a FTSE Total China benchmark.

Can we combine representative portfolios of China Offshore and China A strategies for our track record submission?

In the representative portfolio its important that we can assess the team’s ability to select stocks from the entirety of the China Equity universe. We may consider a blend of China Offshore and A shares if both strategies have historically been run by the same Portfolio Management team but would require the two track records to be submitted separately.