Agenda item

The purpose of this report is to update the committee on the Fund’s investments.

I have attached 2 appendices (part of which is exempt) to the report.

The report provided the Sub-Committee with an update on the Fund’s investments. Sawan Shah (Senior Finance Analyst) in introducing the report reminded members of the Sub-Committee’s decision in February 2020 to continue significant allocations to diversifiers and, as part of this review, to introduce an allocation to Private Debt; an income focussed asset with a shorter-term focus than infrastructure. The strategic rationale for doing this was to deliver an absolute return, meaningfully higher than might be achieved investing in cash or short-term high-quality bonds. 

As part of pooling, it was expected that any new investments would only be made through London CIV, in line with the Fund’s investment strategy.  In light of this and the Fund’s long-term objective to invest 5% of its strategic allocation to Private Debt this would represent an investment of £50m. It is expected that, initially, capital calls would be funded using the Fund’s existing cash holdings. He added that officers would be proceeding with this allocation to Private Debt through the London CIV offering, subject to further due diligence, which was in line with the previously agreed strategic allocation to the asset class.

Mr Shah continued the investment update adding as part of the intention to reduce the allocation of UK equities to the interim target allocation a total of £26m was sold in tranche 1 in December 2020 and £30m from LGIM UK equity in February 2021.  The proceeds were invested equally between LGIM global equity and Ruffer.  In addition to this, the Committee also approved an initial investment of c£28m into the BlackRock passive low carbon equity fund on 16 July 2020. Members heard that with a committed £50 million to London CIV’s infrastructure fund, in October 2019, the total commitments to the fund stand at £399 million therefore London Borough of Brent’s investment represents 12.5% of the Fund.

The Brent Pension Fund currently had a number of private equity holdings with Capital Dynamics that were entered into between 2004 and 2006 and were at the end of their expected life. However, these investments had not been fully wound down and Capital Dynamics had proposed that unrealised holdings in 4 investments be sold as a block to a single investor (“Project Phoenix”).   Capital Dynamics asked the Fund, together with other investors, to vote on the sale proposal, which required 50.01% of investors to consent in order to pass.  Following advice from Hymans Robertson on this transaction, the Fund voted in favour of the transaction and elected for the cash redemption. Officers requested approval of this decision from the Chair of the Committee and the Director of Finance prior to the deadline of 04 February 2021.  Officers were awaiting the outcome of the vote.

Members welcomed the report and with no further issues raised, the Chair confirmed that all members had followed the discussions and thanked members and officers for their contribution.  It was RESOLVED:

(i)     That the overall report including the investment update and Capital Dynamics proposal be noted.

(ii)    To note that officers would be proceeding with the allocation to Private Debt through the London CIV offering, subject to further due diligence, in line with the previously agreed strategic allocation to the asset class.