Agenda item

To receive the Brent Pension Fund H2 2023 Investment Monitoring Report.

Kenneth Taylor (Hymans Robertson LLP) presented the report, which outlined the performance of the Brent Pension Fund over the second half of 2023. Regarding the overall performance of the Fund, the Committee heard that the Fund had posted a positive return over the second half of the year, ending the period with a valuation of £1,203.0m up from £1,125.7m at the end of Q2 2023. This translated to a 6% return, 0.4% above the benchmark of 5.6%. When looking at the previous 12 months, the Fund had returned 9.4% which was behind the benchmark of 10.8%. However, it was explained that this was still considered a strong performance given the recent economic landscape. In concluding the discussion on overall performance, the Committee was advised that across the last 3 years the Fund had returned 4.5% against a benchmark of 4.3%, therefore the Fund’s performance was positive both in the long-term and short-term.

In discussing the Fund’s asset allocations, the Committee noted that the Fund’s allocation to UK gilts had increased from £49.7m to £122.1m across the reporting period. Members were informed that this increase was due to rebalancing in which equity investments were sold and the funds reinvested into UK gilts.

In highlighting page 16 of the agenda pack which focussed on the funding position of the Fund, the Committee noted that this information was new and detailed the changes in the funding level from Quarter 1 (Q1) 2022 to Quarter 4 (Q4) 2023. Overall, the funding level had increased from 87% in Q1 2022 to 115% at the end of Q4 2023, with assets now larger than liabilities which was the opposite of the position that the Fund found itself in at Q1 2022, a significant improvement. Members were advised that the Fund currently had a surplus of approximately £150m which was largely due to the value of liabilities decreasing as a result of higher expected future returns of assets.

Concerning manager performance, Kenneth Taylor detailed that, with the exception of property funds, all funds posted positive returns over the previous 6 months. However, when reviewing the previous 12 months the performance of managers was more mixed, with funds such as Capital Dynamics Private Equity performing poorly. Nevertheless, despite the poor performance of some funds, the Committee was informed that these funds comprised of a small percentage of the Fund’s overall holdings and therefore the performance of these funds did not have a significant impact on the overall performance of the Fund. In focussing on the top performer, the LGIM Global Equity fund, it was explained that the fund had returned 17.5% over the previous 12 months, which was said to be impressive given the high inflation and rising interest rates. The positive performance of the LGIM Global Equity fund was further compounded by the fact that the Fund held a large percentage of its assets within this holding. Furthermore, members heard that the BlackRock UK Gilts Over 15 years fund was the second largest contributor to the Fund’s positive performance over the second half of 2023.

Following the presentation of the report, the Chair invited members to raise any questions or concerns, with queries and responses summarised below:

•         In response to a query as to why there were no figures relating to the performance of the infrastructure funds over the previous 6 months, members were advised that, although the figures were available, they were omitted from the report as short-term monitoring could result in misleading assumptions as these assets were long-term investments.

Members welcomed the report and, with no further issues raised, thanked Hymans Robertson LLP for their presentation. Consequently, the Committee RESOLVED to note the report.