Agenda item

To receive the Brent Pension Fund Q1 2022 Investment Monitoring Report.

Kameel Kapitan (Hymans Robertson LLP Investment Consultant) introduced a report which outlined the performance of Brent Pension Fund during Q1 2022.

In presenting the report, the following were highlighted as key strategic points:

·                The Committee were provided with an initial outline of the monitoring process, which included a breakdown on Fund Performance versus the expected benchmark over the relevant quarter along with forecasts on a short, medium and long-term basis. Additionally, the processes of Hymans Robertson monitoring Manager performance within the Fund was explained to the Committee, as well as new Climate monitoring metrics.

·                A high-level summary of the performance of the Fund was then presented to the Committee, with the key points highlighted below:

Ø   The Fund had posted negative returns over the quarter, ending the period with a valuation of £1,132.7m, down from £1,155.7m at the end of Q4 2021. This was due to a number of global factors, including the Covid-19 pandemic, increasing energy and gas prices and the ensuing inflation and increased interest rates;

Ø   The majority of assets classes struggled in Q1 2022 amidst the challenging environment. Index-tracking mandates with LGIM (global equities) and BlackRock (gilts) contributed heavily to the negative absolute return whilst the LCIV Baillie Gifford multi-asset fund, the LCIV emerging markets fund and the LCIV multi-asset credit (MAC) fund all drove relative underperformance versus the benchmark;

Ø   Marginally offsetting returns was the performance of UK equities (LGIM index-tracking fund) and the LCIV Ruffer multi-asset fund. Both delivered positive return with Ruffer in particular demonstrating the value of its more defensive approach to multi-asset investing.

·                In Q2 2022 the Fund would seek to complete planned investment in the BlackRock Low Carbon equity fund whilst continuing to explore any attractive secondary market opportunities within the property space consistent with the decision taken at the October 2021 Committee meeting.

·                Moving on to talk about asset allocations of the Fund, it was updated that the Fund was positioned well in terms of matching its interim and long-term benchmarks.

An overview was then provided in relation to manager performance of the various funds, with the following noted:

·                Members were advised that total Fund return remained strong and positive on both an absolute and relative longer term basis, with Managers performing broadly as expected. The one Manager not performing as expected was the Capital Dynamics and Alinda Funds, though due to their small size this did not have a material impact on the Fund.

·                It was noted that UK equity markets had outperformed global markets over the quarter with returns achieved by Ballie Gifford and Ruffer both remaining strong.  It was noted, however,  that the Ruffer Multi Asset Fund had adopted a more defensive position to deal with market volatility, resulting in a more positive return over the quarter. This was important for the Fund, to ensure diversification of assets.

·                An overview was also provided on the ‘Hymans rating’ for Managers, which provided an evaluation of how different Managers were performing. In Q1, it was updated that there had been no significant changes in Manager performance with confirmation provided that where no rating had been applied, this was not due to performance issues but reflected the limited data available to provide a meaningful rating at this stage.

Members were then provided with a summary of the climate risk analysis and carbon intensity by Fund Managers. Key issues highlighted were as follows:

·                The Committee were updated that the Fund was reporting in line with information produced by its Pool, the London CIV.  Key metrics were currently focussed around weighted average carbon intensity and Fossil Fuel exposure with the information covered capturing approx. 80% of the Fund’s assets, as at 31 March 22.  Members were assured this provided an accurate and reliable level of data. In time, the Fund would seek to evolve its climate risk monitoring process by monitoring against further metrics.

·                Despite only representing 15% of assets shown within the report, the LCIV Baillie Gifford multi-asset fund was responsible for 28% of the Funds total carbon intensity.  It was noted that Baillie Gifford had provided a rationale to officers as to why this was the case, and many businesses they were investing in were committed to transitioning to a low carbon economy going forward.

The Chair thanked Hymans Robertson LLP for their presentation and members were then invited to ask questions, with the responses summarised below:

·                It was agreed that further detail would be provided for future meetings on the key criteria applied in relation to the assessment of Manager performance and the ratings applied by Hymans Robertson in relation to their Responsible Investment (RI) rating.

·                In terms of a commitment to renewable energy from Managers, it was agreed that more information would be shared at a future meeting.

·                Further details were also requested on the breakdown of fees by each Manager and any benchmarking comparisions available.  Whilst details of the fees charged were incorporated within the Statement of Accounts it was agreed that further detail could be provided for future meetings.

·                In terms of any wider more general benchmarking in relation to performance of the Fund the Committee was advised that yearly benchmarking within the LGPS was undertaken, which included Brent. Once the information for the previous monitoring period was received, this would be presented to the Committee as part of the Funds Annual Report.

Members welcomed the update provided and with no further issues raised thanked Hymans Robertson LLP for their presentation.  It was RESOLVED to note the report.

Kameel Kapitan (Hymans Robertson LLP Investment Consultant) introduced a report which outlined the performance of Brent Pension Fund during Q1 2022.

In presenting the report, the following were highlighted as key strategic points:

·                The Committee were provided with an initial outline of the monitoring process, which included a breakdown on Fund Performance versus the expected benchmark over the relevant quarter along with forecasts on a short, medium and long-term basis. Additionally, the processes of Hymans Robertson monitoring Manager performance within the Fund was explained to the Committee, as well as new Climate monitoring metrics.

·                A high-level summary of the performance of the Fund was then presented to the Committee, with the key points highlighted below:

Ø   The Fund had posted negative returns over the quarter, ending the period with a valuation of £1,132.7m, down from £1,155.7m at the end of Q4 2021. This was due to a number of global factors, including the Covid-19 pandemic, increasing energy and gas prices and the ensuing inflation and increased interest rates;

Ø   The majority of assets classes struggled in Q1 2022 amidst the challenging environment. Index-tracking mandates with LGIM (global equities) and BlackRock (gilts) contributed heavily to the negative absolute return whilst the LCIV Baillie Gifford multi-asset fund, the LCIV emerging markets fund and the LCIV multi-asset credit (MAC) fund all drove relative underperformance versus the benchmark;

Ø   Marginally offsetting returns was the performance of UK equities (LGIM index-tracking fund) and the LCIV Ruffer multi-asset fund. Both delivered positive return with Ruffer in particular demonstrating the value of its more defensive approach to multi-asset investing.

·                In Q2 2022 the Fund would seek to complete planned investment in the BlackRock Low Carbon equity fund whilst continuing to explore any attractive secondary market opportunities within the property space consistent with the decision taken at the October 2021 Committee meeting.

·                Moving on to talk about asset allocations of the Fund, it was updated that the Fund was positioned well in terms of matching its interim and long-term benchmarks.

An overview was then provided in relation to manager performance of the various funds, with the following noted:

·                Members were advised that total Fund return remained strong and positive on both an absolute and relative longer term basis, with Managers performing broadly as expected. The one Manager not performing as expected was the Capital Dynamics and Alinda Funds, though due to their small size this did not have a material impact on the Fund.

·                It was noted that UK equity markets had outperformed global markets over the quarter with returns achieved by Ballie Gifford and Ruffer both remaining strong.  It was noted, however,  that the Ruffer Multi Asset Fund had adopted a more defensive position to deal with market volatility, resulting in a more positive return over the quarter. This was important for the Fund, to ensure diversification of assets.

·                An overview was also provided on the ‘Hymans rating’ for Managers, which provided an evaluation of how different Managers were performing. In Q1, it was updated that there had been no significant changes in Manager performance with confirmation provided that where no rating had been applied, this was not due to performance issues but reflected the limited data available to provide a meaningful rating at this stage.

Members were then provided with a summary of the climate risk analysis and carbon intensity by Fund Managers. Key issues highlighted were as follows:

·                The Committee were updated that the Fund was reporting in line with information produced by its Pool, the London CIV.  Key metrics were currently focussed around weighted average carbon intensity and Fossil Fuel exposure with the information covered capturing approx. 80% of the Fund’s assets, as at 31 March 22.  Members were assured this provided an accurate and reliable level of data. In time, the Fund would seek to evolve its climate risk monitoring process by monitoring against further metrics.

·                Despite only representing 15% of assets shown within the report, the LCIV Baillie Gifford multi-asset fund was responsible for 28% of the Funds total carbon intensity.  It was noted that Baillie Gifford had provided a rationale to officers as to why this was the case, and many businesses they were investing in were committed to transitioning to a low carbon economy going forward.

The Chair thanked Hymans Robertson LLP for their presentation and members were then invited to ask questions, with the responses summarised below:

·                It was agreed that further detail would be provided for future meetings on the key criteria applied in relation to the assessment of Manager performance and the ratings applied by Hymans Robertson in relation to their Responsible Investment (RI) rating.

·                In terms of a commitment to renewable energy from Managers, it was agreed that more information would be shared at a future meeting.

·                Further details were also requested on the breakdown of fees by each Manager and any benchmarking comparisions available.  Whilst details of the fees charged were incorporated within the Statement of Accounts it was agreed that further detail could be provided for future meetings.

·                In terms of any wider more general benchmarking in relation to performance of the Fund the Committee was advised that yearly benchmarking within the LGPS was undertaken, which included Brent. Once the information for the previous monitoring period was received, this would be presented to the Committee as part of the Funds Annual Report.

Members welcomed the update provided and with no further issues raised thanked Hymans Robertson LLP for their presentation.  It was RESOLVED to note the report.