Brunel’s responsible investment expertise helps cut management fees

Brunel Pension Partnership is making cost savings of £34 million ($41 million) per year, two years ahead of its initial target of saving £27.8 million a year by 2025. The partnership’s latest annual report and financial statements reveals that Brunel is saving almost four times the costs it incurs thanks to the management fees it is able to negotiate because of its responsible investment expertise.

“Two years ahead of schedule, Brunel is saving around four times the costs we incur via the management fees we negotiate.,” writes Denise Le Gal, Chair, in her Forward to the report.

Brunel says its success reflects two defining characteristics. The professionalism and efficiency of its approach to pooling and the negotiating power it gains from leadership in sustainability. More than 80 per cent of client AUM has been transferred into the pool.

While the specific targets on cost savings were set by Brunel Pension Partnership, the broader ambitions of pooling were defined by the UK government when it launched the pooling process. The UK’s 100-odd small local authority pension schemes grouped into eight bigger pools six years ago, tasked with creating economies of scale, cutting costs and broadening access alternative investments.

Infrastructure investment

“Private markets have been an important part of the cost-saving jigsaw,” continues le Gal. At Brunel, infrastructure is a core focus, and the partnership is in its third cycle of allocating to private market portfolios. Through these portfolios, it has targeted a range of infrastructure projects and currently has around £819 million invested in the asset class which has delivered £6 million in cost savings.

“We launched Cycle 3 of our private markets portfolios in 2022. Private markets offer us a particular opportunity to construct and direct the new economy, one that delivers both the Net Zero transition, and the Just Transition needed to make it happen,” says chief executive Laura Chappell.

Other 2022 highlights include co-launching a new series of Paris-aligned benchmarks with FTSE Russell. Brunel also added two new mandates to its Sustainable Equities portfolio.

Small is beautiful

Brunel has also launched a bespoke local impact portfolio for client fund Cornwall Pension Fund. The £115 million Cornwall Local Impact Portfolio (its smallest ever portfolio) is the first LGPS multi-asset portfolio to target local impact.

Brunel was able to negotiate mandates with two leading global managers – one for affordable housing, the other for renewables – and to harness the portfolio to target those priorities in a county where both poverty and climate change are significant challenges.

Brunel recently launched a Climate Stocktake and published a new Climate Change Policy.

“The twin challenges of transition finance and accelerating global change are enormous. By delivering on the goals set by our partnership, we will not just benefit our clients and their members. In the long-term, we will demonstrate to the wider industry to our belief that RI is indispensable to achieving healthy long-term returns,” concludes Chappell.