East Riding’s Mark Lyon Likes Alternatives, Just Not Hedge Funds

CIO eliminated hedge fund allocation over fees but puts 21% of $5.3 billion pension in property, private equity and infrastructure.

Mark Lyon is a do-it-yourself kind of guy. “You can’t blame the fund manager if the fund underperforms,” he says. Lyon is happy to take the responsibility onto his shoulders at the East Riding fund, which covers 93,000 public employees and retirees in the southeastern Yorkshire district. With only one external manager, for overseas equity, Lyons and his team of eight investment staff manage 80 percent of the fund’s £3.7 billion ($5.3 billion) in assets.

After taking the helm in 2010, Lyon spent more than two years streamlining the fund’s U.K. equity holdings — 38 percent of overall assets — slashing its positions in half, to about 90 stocks. Public equities make up 60 percent of the overall portfolio, with fixed income at 19 percent. After two years of observing the legacy hedge fund portfolio, Lyon eliminated it. “It goes back to having control,” he explains, citing hedge funds’ high fees and lack of transparency.

The pension fund has a 21 percent allocation to alternatives, including property, private equity and infrastructure, the last a particular hot spot these days. Last July, Chancellor of the Exchequer George Osborne called on the 89 local government pension schemes (LGPS) in England and Wales to merge into a handful of large funds so they can invest more in U.K. infrastructure. Lyon is playing his part, helping to organize Border to Coast, a group that will pool 13 LGPS plans with combined assets of £32 billion. He aims to create a central fund along with the South Yorkshire and Teesside pensions to offer internal management to the new pool, which is set to go live in 2018. Lyon brings solid experience to the task after success with an alternative fixed-income portfolio that includes real estate and corporate mezzanine debt, aircraft leasing and bank capital release transactions. Lyon joined the fund as an analyst in 2002 after qualifying as a chartered accountant. He trained as a portfolio manager at the Derbyshire Pension Fund for seven years before returning to East Riding in 2010 as investment head.

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2016 European Money MastersClick below to view profiles.

Investor Lifetime AchievementRoger GrayUniversities Superannuation SchemeGermanyStefan HentschelEvonik IndustriesU.K. CorporateTony BroccardoBarclays UK
Retirement FundCentral and Eastern EuropeKatrin RaheSwedbank Investment
Manager Lifetime AchievementPascal BlanquéAmundiNetherlandsMark BurbachBlue Sky GroupSmall CountriesPaul DroopBank of IrelandFranceSalwa Boussoukaya-NasrFonds de Réserve pour
les Retraites
SwitzerlandAdrian RyserMigros-PensionskasseU.K. PublicMark LyonEast Riding Pension FundScandinaviaHenrik Olejasz LarsenSampension