Lincolnshire County Council has put the fund out to tender, although BIAM has been invited to join the tender process. "We have been invited to participate in the forthcoming search process and we are very happy to have the opportunity to tender for the business, " said a BIAM spokeswoman. "However, until such time as the process is completed, we don't feel it would be appropriate for us to comment further."

Poor investment performance, and the defection of a team of top fund managers, has severely dented confidence in BIAM, especially in the US, leading to a string of client defections.

Assets under management slumped from 55.7bn to 43bn in the year to last October while pre-tax profits at BIAM fell to 51m in the first half of 2005 from 70m a year earlier.

Despite the set backs, BIAM is continuing to beef up its asset management business. Last December it agreed to pay 153m for 71% of Guggenheim Alternative Asset Management, a hedge-fund manager based in New York. It has $2.8bn under management.