It has been another exciting and challenging year for Brunel and our LGPS Clients.
The last year has seen substantial progress in the development of our investment business. We have worked closely with our Clients to deliver new portfolios, and a very useful development has been an assurance framework with Clients so they can be satisfied we have met the specification for each portfolio, and so allocate to the portfolios in an expedited manner.
By the end of 2019 we successfully transitioned circa £15bn of Client assets, which amounts to 50% of the projected total. By Q4 2020, we expect to have launched the majority of our portfolios and the transition of Client assets to Brunel should be nearly complete. We will increasingly focus on management and how we can continue improving the portfolios and the service we provide.
We have received excellent feedback from managers about the quality of our selection processes, and the robustness of our investment and operational due diligence – it’s become known across the industry that we kick the tyres quite hard. This absolutely fits with our long-term and sustainable approach towards investing for our Clients.
We restructured the listed markets investment team during 2019, recognising growing demands in this area. David Cox was appointed to the newly created position of Head of Listed Markets in the first quarter.
Following the launch of four passive portfolios in 2018, activity has picked up tremendously.
We have focused on refining our processes and analysis. Our manager evaluation process is rigorous, and we use a range of tools to ensure managers have genuine skill and are doing what they say they do. We work in particular with Inalytics, who provide detailed analysis of how good managers are at buying and selling. We also integrate responsible investment into our manager selection, expecting managers to be able to demonstrate how they have considered Environmental, Social Governance (ESG) issues in the portfolio.
One area we have particularly developed is portfolio construction. Detailed analysis equips us to build the best combination of managers in the best proportion, balancing risks and other factors. The aim is to reduce idiosyncratic manager risk and manage other risks while meeting our cost and return targets, thereby achieving the portfolio objectives in a more controlled manner.
We are also developing ongoing portfolio management processes. We procured a Portfolio Management System from FactSet to ensure we manage the live portfolios effectively. Our scrutiny of appointed managers is thorough, and we are pleased with how our managers have responded to the challenges we have set them, particularly in the area of climate change risk.
Our private markets team, under the leadership of Head of Private Markets Richard Fanshawe, has made great strides forward, investing around £1,261 million of capital allocated by Clients in this first cycle. We appointed Colmore as our specialist private markets middle/back office provider to support the administration of our private market portfolios. The team have also been very busy preparing for the launch of the second cycle of PM portfolios and early indications from Client funds have been very encouraging.
It is already clear that pooling offers tremendous advantages in investing and offers much more than cost savings – although the team has already achieved significant cost savings for Clients. The professionalism and proactivity of the team means that managers want to work with them, which has resulted in strategic partnerships and other enhanced relationships.
I am immensely pleased with the continued impact we have had on responsible investment in our second year, led by Faith Ward. Working with Clients on priority areas, we published position statements on tax and climate change.
In 2018 we published our Responsible Investment Policy based on three pillars: ’To Integrate’, ’To Collaborate’ and ‘To Be Transparent’. It has been encouraging to see significantly increased interest across UK government and regulators in responsible investment, stewardship, and environment and social issues. Our full list of consultation responses are published on our website page policy advocacy.
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