Brunel Pension Partnership delivers cost savings of £46m

The UK’s Brunel Pension Partnership annual report shows the investment pool has saved its partner funds £46m (€54.6m) annually versus pre-pooling.

This, according to the pool, is “significantly ahead” of what the business case had anticipated for that financial year.

It added that Brunel has already broken even – a target initially set for 2025 – saving around four-and-a-half times the costs it incurs via a reduction in management fees it negotiated.

It said that compared to both current market rates and against the full investment cost to partners, Brunel saved 22 basis points through 2023/24 – equivalent to £64m.

Brunel is one of the UK Local Government Pension Scheme (LGPS) pools and brings together the investments of 10 pension funds: Avon, Buckinghamshire, Cornwall, Devon, Dorset, the Environment Agency, Gloucestershire, Oxfordshire, Somerset and Wiltshire.

As Brunel continues to mature, and while the pool is now over 90% pooled, it said its pre-pooling position has become “less relevant” to partner funds.

Brunel has successfully implemented its Value for Money (VFM) Scorecard, which focuses on the long-term sustainability of the business and ensures the requirements of key stakeholders are being met.

It said: “Instead of assessing performance against history, the VFM Scorecard will continue to drive our future performance by measuring financials, customer service, internal processes, and learning and growth to evaluate overall performance and to move away from a pure cost-savings focus.”

Investment

Brunel has also shared that in the last year its assets under management increased to £35.9bn, equating to 86% of client investments within the partnership pooled structure.

Listed markets account for £26.6bn in portfolios across equities and bonds and these continue to be managed to meet clients’ investment needs.

Private markets, meanwhile, accounted for £9.6bn of total commitments across all five private markets asset classes including property.

It added that a 4th cycle (or vintage) of portfolios, which has been agreed with partner funds, is actively being deployed with £4.5bn so far, with a further £3bn committed but as yet undrawn from the three prior investment cycles.

The Brunel team manages portfolios across Infrastructure, private equity, private debt and secured income.

A further £2bn of property investments is also managed by Brunel on behalf of its clients.

Brunel added that performance for the year to the end of September 2024 for its listed market portfolios was “positive in absolute terms” and all active funds except for the Diversifying Returns Fund (DRF) enjoyed double-digit gains.

It added that performance relative to benchmarks was mixed, with the UK, emerging markets, and sterling corporate bond portfolios ahead, and the global high alpha, global small cap equities and global sustainable equities portfolios behind. The DRF and multi-asset credit funds were ahead of their respective targets.

Future of LGPS

Brunel said the key challenge for the upcoming financial year relates to the government plans for the LGPS sector and for investment pools.

“We strongly believe that Brunel is one of the most developed pools – in terms of transitions, governance, operating model, and asset class range. On responsible investment, we are widely recognised as the leader in the sector,” it said.

It added: “We are therefore well-placed to continue to develop and deliver our robust operating model, ensuring compliance with the government’s objectives.”

Brunel stated that, while exercising its fiduciary duty to its clients and their members will remain a core priority, the evolution of pooling and of the LGPS will be “a major focus for Brunel through 2024/25 and will require close coordination across the partnership to ensure that we continue to evolve, as we have done since inception”.

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