Agenda item

To receive the Brent Pension Fund Q2 2025 - 26 Investment Monitoring Update Report.

Sawan Shah (Head of Finance, Pensions and Housing Companies) introduced the report, highlighting the following key points:

• Findings shown within the report demonstrated that the fund posted positive returns over the quarter, ending the period with a valuation of £1.36 million compared to £1.32 million in Q1. Sawan Shah noted that these findings hid the volatility experienced in April 2025. Whilst looking relatively flat, during the first and second week of April the Liberation Day tariff announcement saw sharp selloffs in the global markets. Despite the US administration's quick change in course, in the second half of April, global equities gained roughly 5.2%. This was driven by the US technology sector alone.

• Overall, the Pension fund was reported to have gained a 3.2% return throughout the quarter, slightly outperforming the expected benchmark with overall yearly returns standing at around 5.7%, of which most returns came through passive global equity mandates. The UK equities and emerging markets were also reported to have performed well. Government bond holdings were largely flat through the quarter, which was shown within the appendices demonstrating how the fund's returns were weighted by size. 

Following the conclusion of the report, the Chair thanked Sawan Shah for the update and opened the floor to any questions or comments from the Board, with the points summarised below:

• The Board asked officers to detail their current forecast for government bonds. Sawan Shah explained that the government bond market, especially at the short end, was currently highly volatile. The most recent bond forecast from October was noted to be positive, yet government bond yields had fallen in value through the rest of the month. Government cost of borrowing was not as strong as previously; however, this had also had an inverse impact for the bond price. As such, bond prices had gone up through October, and future prospects were unpredictable with officers uncertain of where government bonds would eventually settle. Bond markets were stated as a reason for the US administrations’ change in course due to yields sharply increasing, and only when US actions had a material impact on the rate that the US government could borrow did they step back from their policy choices. As such, officers believed the bond market held considerable influence.

Members of the Board inquired as to whether the UK had recently downgraded its national financial security or credit standing. Sawan Shah noted that in the last month, government bond yields had gone down significantly, by approximately 0.2 - 0.3%. As such, October was seen to be favourable for the UK government in terms of its borrowing, taking advantage of low-cost yields. General decreases in the UK’s credit standing were noted with sector volatility remaining. Officers noted that government bond yields were now higher and, did not believe that bond yields were going to go back down to levels seen during 2020/2021. Rather it was expected that bond yield rates would fluctuate around the 4% or 5% mark, where they sat at the time of the meeting. Bond rates would change daily, depending on national and global developments, with the Pension Fund not factoring in short term fluctuations but instead taking a long-term view on investment. Because of this, bond yields were stated to be a much more attractive long-term proposition, allowing for officers to effectively benchmark a risk-free rate of return and being much closer aligned to Brent actuary’s mandated discount rates and improving funding valuations.
With no more questions or comments from members of the Board the Chair thanked officers for their contributions and moved to conclude the item. Members of the Board RESOLVED to note the contents of the report.