Asset managers have defended the work of the Brunel Pension Partnership after the Local Government Pension Scheme (LGPS) asset pool was told to wind up by the government.
The chief executives of Capital Dynamics and Royal London Asset Management, as well as senior investment staff from Schroders, StepStone and UBS Asset Management, have praised the pool’s work on responsible investment and net zero investing.
In addition, cost transparency specialist firm ClearGlass has highlighted the pool’s negotiating power in achieving lower-than-average costs across all asset classes.
It comes as Brunel - set up a decade ago to consolidate the assets of 10 LGPS funds in the south-west of England - has responded to the government’s decision to order the pool to wind up and its partner funds to move to other pools.
“We strongly reject any suggestion that weaknesses as a pool explain the government’s recent invitation to Brunel’s partner funds to seek an alternative pooling arrangement.”
Laura Chappell, Brunel Pension Partnership
Support from asset managers
Martin Hahn, CEO at Capital Dynamics, said his firm was “proud” of its work with Brunel investing in clean energy and net zero strategies. He also praised its approach to embedding responsible investment into asset manager agreements and “providing guidance that has strengthened our own and other managers’ ESG frameworks, helping to ensure they are among the most robust, impactful and enduring in private markets”.
“[Brunel has] been a pioneering investor in local impact mandates through our UK clean energy funds, bringing significant investment to previously underserved communities and job creation, progression and local growth,” Hahn said.
“We hope that the success of the Brunel team in creating a cost-conscious portfolio… is not lost in the broader requirement to deliver on the mandate set by the government.”
Hans Georgeson, Royal London Asset Management
Royal London Asset Management runs equity and fixed income mandates for Brunel clients. Its chief executive, Hans Georgeson, said the success of these mandates “stems from Brunel’s requirement for robust, repeatable, and competitively priced investment solutions”.
He added: “We hope that the success of the Brunel team in creating a cost-conscious portfolio, that is capable of delivering risk-adjusted returns for [the LGPS], is not lost in the broader requirement to deliver on the mandate set by the government.”
James O’Leary, head of infrastructure and real assets at StepStone Group, which runs £2.2bn on behalf of the pool, said: “Brunel’s investment approach is highly innovative in driving sustainable investments, attractive investment terms, and global diversification whilst being able to support LGPS objectives, such as lower fees, investments in UK infrastructure, and flexibility to meet its client objectives and needs.”
Brunel’s partner funds have invested almost £1bn in infrastructure and UK impact investment strategies run by Schroders. Minal Patel, global head of infrastructure at Schroders Capital, said these investments had supported UK decarbonisation efforts and expressed hope that pooling would continue to deliver “more of the same”.
Jon Hollick, head of global real estate at UBS Asset Management, highlighted his firm’s partnership with Brunel to launch a UK life sciences real estate strategy in 2022. He said the work demonstrated “the power of LGPS collaboration to unlock the potential of the growth of a sector, which can have positive economic and societal benefits”.
PLSA calls for ‘evidence-led’ approach to LGPS pooling overhaul
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Brunel’s ‘super-procurement’ capabilities
The Brunel Pension Partnership reported annual cost savings of £46m in the 2023-24 financial year, when compared with its pre-pooling cost base.
In its latest annual report, the pool said it had saved “around four-and-a-half times the costs we incur via the reduction in management fees we negotiate”.
“Brunel fees are lower than expectation, not because of scale, but because Brunel has negotiated effectively.”
Dr Chris Sier, ClearGlass
Dr Chris Sier, founder and CEO of ClearGlass, said: “In very rare cases, it is possible to achieve fees well below those predicted by portfolio size, and this applies to all Brunel strategies delivered to underlying local authority clients.
“I must emphasise that such ‘super-procurement capability’ is rare, 79% of strategies procured by local authority clients from Brunel are better than best quartile in the ClearGlass ranking.
“There are no scale economies in private markets. However, Brunel fees are lower than expectation, not because of scale, but because Brunel has negotiated effectively.”
Pool mounts strong defence of progress
Chief executive officer Laura Chappell highlighted Brunel’s progress on transitioning assets, investing in the UK and allocating in line with the Mansion House Compact. It has also led on several international responsible investment projects and worked with other asset owners around the world to make progress on environmental goals.
“In short, we did not simply meet the initial aims of pooling: we exceeded those aims and blazed a trail in responsible investment across the global asset owner space,” Chappell said.
“For these reasons, we strongly reject any suggestion that weaknesses as a pool explain the government’s recent invitation to Brunel’s partner funds to seek an alternative pooling arrangement.
“Nevertheless, the pace of progress our partnership has already shown means we remain confident that our impact should, and will, continue. We embraced evolution and change when pooling began and thus are one of the most transitioned pools. We are determined to do the same for the next stage of pooling.”
The pool is seeking to engage with the Ministry of Housing, Communities and Local Government and the Treasury as it plans for its next steps. Chappell said Brunel would be “led by our partner funds” and continue to focus on achieving “the best outcomes for our partner funds and their members”.
Mark Gayler, Brunel’s client group chair, added: “We are very proud of what we have achieved as a pool in our short existence, across all our key agendas. We know that our success has come from the strength of working together in partnership. We are exploring options to harness that strength for the future, so that our impact and influence can continue.”
