Agenda item

To receive the Brent Pension Fund Q1 2026 - 27 Investment Monitoring Update Report.

The Chair invited Kenneth Taylor (Hymans Robertson) (Hymans Robertson) to introduce a report, which outlined the performance of the Brent Pension Fund over the Q1 monitoring period 2026 (January - March 2026).  Members were advised this formed part of the Sub-Committee's regular reporting cycle, designed to help members monitor investment performance against expectations, review whether investment managers were delivering expected outcomes, compare the Fund's current asset allocation against its long-term strategic targets, and consider whether any investment changes might be required to keep the Fund on track with its agreed strategy.

Prior to presenting the report, members were also advised that once the Pension Fund pooling arrangements had been fully implemented future Investment Monitoring Updates would be provided through the London CIV.

In outlining the market background to the reporting period, it was noted that the 12 months to the end of March 2026 had been an eventful period from a geopolitical perspective, beginning with the announcement of US tariffs in April 2025, which had led to a sharp but short-lived fall in equity markets, and including the onset of the conflict in Iran in February/March 2026, which had increased inflation expectations. Despite this backdrop, equity markets had delivered strong returns over the year.  Global equities had returned 18% over the 12-month period, UK equities over 20%, and Asia Pacific markets 47%, whilst returns on other asset classes such as UK gilts, corporate bonds, property and cash had been more limited but still generally positive.

The key highlights of the report were noted as follows:

·            Regarding total Fund performance, members were advised that the Fund had returned 12.7% over the 12-month period, compared with a benchmark return of 12.2%, though the latest three-month return had been negative, reflecting the impact of the war in Iran late in the quarter. Over three years, the Fund had achieved an annualised return of 9.2%, which was slightly behind its predicted benchmark.

·            In relation to asset allocation, it was noted that the Fund had largely exited the London CIV Baillie Gifford Multi-Asset Fund during the first quarter of the year, in line with the decision taken following the last strategy review with the value of that holding having fallen from £110m at the end of December 2025 to £2.2m at the end of March 2026 and expected to be fully realised over the coming months, with the proceeds reinvested in the Fund's protection assets, namely the London CIV CQS Multi-Asset Credit Fund and the BlackRock UK Gilts Fund. The total growth asset allocation stood at around 58%, higher than the long-term target allocation agreed at the last strategy review; members were advised that this overweight position was deliberate, reflecting the time it would take to build out the Fund's private market investments on which officers would continue to work with the London in order to understand the plans they had for building those investments.

·            At fund manager level, it was noted that the LGIM Global Equity Fund had returned 17.7% over 12 months against a benchmark of 17.8%. In breaking down how benchmarks were set for individual funds, Kenneth Taylor explained that the precise benchmark or index used depended on the index provider (such as MSCI or FTSE) and reflected the composition of the relevant market.  In terms of specific Funds, it was also noted that details had been provided on each mandate’s contribution to the Fund’s absolute performance over the monitoring period, according to their allocation (including supporting details within the exempt appendix which had been provided for members of the Sub Committee).

Following presentation of the report, the Sub-Committee was invited to raise any questions, with the highlights summarised below:

·            In beginning the discussion, queries were raised regarding how the funds infrastructure investments were managed and how this would change under the new pooling arrangements. In response, Kenneth Taylor confirmed that the Fund currently held three infrastructure investments, with the Alinda and Capital Dynamics funds being legacy, wind-down investments not forming part of the Fund's long-term strategy, whilst the London CIV infrastructure fund would form the long-term vehicle for this asset class, against a target allocation of 10%.

·            Following on, details were sought as to what the expected timescale for the wind-down of the legacy funds might be, with members advised this was expected to take in the region of two to four years. Sawan Shah (Head of Finance, Pensions and Housing Companies) added that the Capital Dynamics holding was now negligible in size and had a correspondingly minimal impact on overall Fund performance.

·            In commenting on the overall performance of the fund, Members noted that the actively managed London CIV Emerging Markets Fund had returned 36% over 12 months against a benchmark of 26%, reflecting changes made to the fund's managers following a prolonged period of prior underperformance, whilst the London CIV Ruffer Multi-Asset Fund, though it had performed well over the most recent 12 months, remained behind benchmark over three years.

·            Regarding the fund-by-fund attribution of returns figures set out on page 25 of the report, Members queried how the constituent contributions shown appeared not to reconcile precisely with the reported total return of -0.9% over the quarter.  In response, Kenneth Taylor and Sawan Shah explained that this reflected the differing weightings of individual holdings within the portfolio, such that even a very strong or very weak return from a small holding would have limited impact on the overall figure, whereas larger holdings, such as the Legal & General Future World Global Equity Fund, had a correspondingly greater effect on total Fund performance.

With no further issues raised, the Chair thanked Keneth Taylor (Hymans Robertson LLP) for the update, noting the importance of the monitoring update and welcoming the Fund's performance over the period as strong and creditable given the prevailing geopolitical backdrop, with it then RESOLVED by the Sub-Committee to note the report.