The West Kowloon Cultural District Authority, a new endowment established by the Hong Kong government, has changed its approach to managing its HK$21.6 billion ($2.8 billion) of assets.

As previously reported, in April the WKCDA sent out requests for proposals (RFPs) to 30-odd fund managers with offices in Hong Kong. It asked them to pitch on strategies to achieve an annual 6.1% absolute return, assuming a 2% rate of inflation, and probably without the use of derivatives for leverage.

Fund executives were critical of an inexperienced group of government officials and appointees trying to get the fund industry to give it free advice on risk budgeting and strategic asset allocation, not to mention asking for aggressive return targets that may not allow for commensurate risk taking.

Moreover, the situation at the WKCDA is said to be chaotic, because the government has struggled to appoint experienced managers.

Now the Authority has changed tack. Last month it sent RFPs to six investment consultants: Cambridge Associates, Hewitt Associates, Mercer Investment Consulting, Russell Investments, Towers Perrin Forster & Crosby, and Watson Wyatt. One source working on a pitch says three consultants have now been short-listed.

WKCDA finance manager Andrew Tsoi, who issued the RFPs, declined to confirm the number of short-listed consultants or identify who is responsible for making the final selection. According to the RFP, the finance manager "will assume general control over the consultancy, who will act as the liaison officer between the consultant and the Authority".

This will be decided by a mix of senior WKCDA officials and government officials. Henry Tang, the financial secretary, chairs the Authority's board of directors.

Fund executives praised the move to bring a consultant on board. "It's a great outcome," says one fund chief executive. "The job is too complicated for the Authority to do by itself. Its people are too inexperienced."

No timetable has been announced, but fund execs hope the consultant is named by the end of the year. The fund-manager RFP process has been put on hold in the meantime. It is yet to be seen whether the winning consultant would recommend changes to the investment process, target and manager-selection process.

The RFP stipulates that the winning consultant must provide a final report within seven weeks of commencing the mandate.

According to the RFPs, consultants are being asked to advise on investment return distribution; strategic and tactical asset allocation; types of assets and securities; exposure and risk in various markets, currencies and securities; and benchmarks. The work needs to take into account the WKCDA's projected cash outlay over a period of seven years.

The Authority also wants the consultant to draw a long list and a short list of fund managers and custodians for each asset class, with final recommendations ready 10 weeks after the consultant's mandate begins.