When Michael Jensen, 55, joined the Lancashire County Pension Fund as CIO in September 2009, the portfolio was too passive and focused on domestic and equity investments, while external generalist consultants ruled investment decisions. This hurt decent performance and the funds ability to pay pensions, which we are required to do by law, Jensen says.
The Cornwall native who earned a BSc honors degree in physics and economics from Imperial College London in 1981 and spent most of the next 28 years as a currency and fixed-income trader in London, mainly at Morgan Stanley and Merrill Lynch & Co. quickly put his experience to work to bring the pension fund into the 21st century, as he puts it. He diversified globally, adopted more active strategies and built up an in-house management team. The £5.6 billion ($8.4 billion) fund, which had about 80 percent of its holdings in domestic assets when Jensen arrived, today invests 74 percent of its assets in overseas markets.
Global equities, which make up a big portion (35.4 percent) of the portfolio, are run mainly by external managers. The rest is managed by Jensen and his team of 11 portfolio managers, analysts and governance and risk employees, with strong weightings on credit, cash, infrastructure funds and direct investments. The fund, which supports about 150,000 retired civil servants in the northwestern English county, returned 13.11 percent in 2014, beating its benchmark by more than 3 percentage points.
Jensen whetted his appetite for the pension business in 2002, when he did a stint as treasury and pension fund manager at the Cornwall County Council, where he found management to be lacking. Although he returned to Merrill in 2006, he knew he wanted back in the pension game. I looked for another public sector pension fund that was interesting but knew it needed to be fixed, he says. Lancashire County Pension Fund fit the bill.
Now Jensen is looking to raise his game even higher. In a move to build out the pension funds direct-investing business, which invests primarily in U.S. and U.K. infrastructure, he bid for the U.K. governments 40 percent stake in high-speed railway service Eurostar, which connects London to Paris and Brussels. LCPF lost the bid in early March to Canadian regional pension fund Caisse de dépôt et placement du Québec and the U.K.s Hermes Infrastructure. The U.K. public pension fund made its first direct investment in 2012. Jensen is now seeking to strike a deal with the London Pensions Fund Authority to pool about £10 billion in pension assets to cut costs and boost exposure to illiquid investments. He believes the new partnership will make it easier to bid on privatization schemes like Eurostar and ramp up direct investments.
This profile is one of 12 written for our 2015 European Investment Management Awards, which honors some of the best investors in the business. See also our profiles of Lifetime Achievement Award winner Henrik Gade Jepsen and Centricas Chetan Ghosh. Check back tomorrow to read about ABN AMROs Geraldine Leegwater.
Follow Georgie Hurst on Twitter at @Ghurst_iimag.