Keeping a close watch on GPs

Cardano, which has been actively investing in private equity on behalf of UK pension clients since it opened its UK office in 2007, has managed to score some big names in that time.

The firm, founded in 2001, has signed ASDA Stores Group Pension Scheme, with about £1.2 billion (€1.4 billion; $2.0 billion) in assets; the £3 billion pension of pharmaceutical giant AstraZeneca; the £2 billion GKN Group pension, which gave Cardano fiduciary responsibility for about €300 million of equity investments; and Thales UK Pension Scheme, with about €1.3 billion in assets.

Cardano specialises in “solvency management”, which involves managing a pension's assets against its liabilities “in a risk-controlled way”, according to Philip Page, client manager with the firm. This includes setting asset allocation, hiring and firing fund managers, choosing investment strategies and exerting risk management control over the organisation.

Cardano has spent time trying to provide comfort that private equity investing can be a safe and beneficial move, despite negative impressions created in the mainstream European press, according to Anna Dayn, investment manager with the firm.

“There is an image we need to grapple with to help our clients understand the asset class better,” Dayn says. “Investors do see that private equity does not cause systemic risk.”

When Cardano selects a private equity manager, it will invest on behalf of all its pension clients, which means exhaustive due diligence on the GP is vitally important. A Cardano-led group that comes into a private equity fund has a loud voice, Dayn says.

“There's power in numbers, there's more value at stake, so the agent for the LP like Cardano has the ability to negotiate terms that are more favourable,” Dayn says.

“In our monitoring of general partnerships, we're hands-on with the GPs, we talk to them once a quarter but often once a month,” she says. “We maintain a close watch on what they do. Even though many of our pensions aren't the largest investors, we often have a large voice.”