What a difference a year makes…

Twelve months on from our inaugural Annual General Meeting in 2018, there’s one fact that no one could dispute – we’ve come a very long way.

“Since our earliest days as Project Brunel back in 2016, through to our one-year anniversary as a company in July 2018 and beyond,” said Brunel Chair Denise Le Gal, “one of our greatest strengths has been our adaptability and willingness to review and refine our business plan for the best possible outcomes for our Client funds and the future.”

We were happy that representatives from the majority of our client funds were able to attend.

Costs and savings

Following a warm welcome from Denise, we were invited to receive and adopt the Annual Report & Financial Statements for the Year Ending 30 September 2018.

Joe Webster, Chief Operating Officer, spoke about how the Report has been expanded this year, reflecting the growth of Brunel.

“We are enormously proud of what we have accomplished, but are aware of challenges not yet faced,” Joe said. “As our shareholders, you now collectively own a full scope MIFID asset manager authorised by the FCA, which is focused on customer excellence, is a leader in Responsible Investment and can demonstrate savings for your members.”

Joe mentioned how, in line with the Business Plan, Brunel achieved its key performance objectives for the year in terms of developing the Company and achieving FCA authorisation status by 31 March 2018. Other accomplishments include the onboarding of nine LGPS clients with State Street for custody services, and the launch and transition of our passive equities’ portfolios in July 2018.

In his comments on Brunel’s financial performance, Joe stated that, as planned, Brunel started to provide core services to clients from April 2018. “The Original Business Case assumed net savings of £550m across its portfolios,” he said. “The estimated fee savings for our first six available portfolios within passive have exceeded the Original Business Case by over £70 million, cumulatively, by 2036.”

The proposal to re-appoint auditors Grant Thornton was seconded and carried.

“‘Brunel is a young company and you have had to cover a lot of ground very quickly since start up,” Paul Flatley from Grant Thornton commented. “A lot of progress has been made. The emphasis you have placed on creating the right culture for both your customers and your employees is clearly evident to me. Through two audits now we have found your team to be very good to work with and very co-operative, which  is a credit you.”

Non-Executive Director Mike Clark spoke in his role as Chair of the Audit, Risk and Compliance Committee, and referred to the fact that “as the business model evolves, it’s inevitable that the risks evolve.”

Delivering on our vision

Laura Chappell, Chief Compliance & Risk Officer, described her role as being to worry. “Primarily I’m here to ensure we keep our FCA authorised status. As you can imagine, given the tight timescales we’ve had to deliver to this year and the limited budget, risks arise for us to deal with on an almost daily basis. We’ve come a long way but I’m still wearing my start-up hat. Our goal over the next year is to move into a steadier state structure with roles and responsibilities well defined in line with our strategic vision. You have supported us through this last year and given us leeway and flexibility when we needed it – now we need to show you that we can really deliver on that vision.”

She touched on the implications of Brexit. “Dare I mention It? We looked at it from two angles – what effect would a no-deal Brexit have on Brunel? And what can we put in place to prepare for this? We believe a no-deal Brexit would have no significant direct effect on Brunel, and that the more immediate impact would be on our asset managers.”

Laura added: “As individuals under Senior Manager & Certification Regime are being held to account by governing and regulatory bodies. We need to be clear about roles and responsibilities internally and build up our procedures around this. This provides assurance and should reduce the amount of oversight our clients need to do as in effect I will become an extension of the FCA.”

On track strategically and operationally

As well as being one of the four Non-Executives on the Brunel Board, Steve Tyson is the Shareholder NED. “Part of my role is to provide assurance to our Shareholders that Brunel is acting in the best and proper interests of its clients and shareholders,” he said. “I can assure you I am able to do so.”

Steve mentioned his attendance at client engagement events “such as those held in Oxford, Bristol and Exeter in November. Those events are an important opportunity to interact with our clients, the shareholders, their committees and local board members, and I thank you for your attendance – they are valuable events for Brunel and our stakeholders.”

He spoke about his views of Brunel’s progress to date. “I’m proud of the work that the team do, and think Brunel is on the right track, strategically and operationally. The Brunel project has from the outset, prior to the incorporation of the company, benefitted from excellent project work, strong governance and a high level of cooperation. Since the inception of the company in 2017, the pace of development has been fast. I and the other board members have challenged and supported the executives on every step of that journey.”

He focused on a key challenge in the past year. “It became apparent in 2018 that with more resource, greater savings could be generated. This led to the development of the new Business Plan and the request for additional resource from shareholders. We are not the only Pool that has found in its first year that existing resource was inadequate, despite thorough pre-planning. Nevertheless, this resource unlocks additional savings. The process of getting the Special Reserve Matter on the new budget approved was important. We are grateful to shareholders for their approval.”

Striving to meet investment goals

Non-Executive Director Freddie Pierre-Pierre talked us through the purpose of the Strategic Investment Committee (SIC), which she chairs. “The role of the committee is to conduct strategic review and oversight of Brunel’s investment activities, to provide strategic insight and support to the Chief Investment Officer, as well as monitor Brunel’s ability to meet its investment obligation to you, its clients.”

She explained that, among other things, the committee considers the suitability of the portfolios on offer, performance of existing portfolios, and the selection and appointment of fund managers. “In the past year, we considered the process surrounding manager selection for the Passive Portfolio, the Active UK Equity Portfolio and the Active Low Vol Equity Portfolio,” she said. “I want to emphasise that the role of the committee is to challenge and question potentially controversial decisions, to offer views born out of experience and to guide but not to override the Chief Investment Officer and executive team. SIC strives to ensure your interests are considered fully.”

A brief update

Chief Investment Officer Mark Mansley provided a brief update on the Annual Report.

“Since our formal year-end four months ago we have moved forward in several area,” he said. “Notably, we’ve launched our Authorised Contractual Scheme (ACS) and UK equities sub-fund, which is our first active equity portfolio. We also agreed commitments to our first six private markets deals in secured income, private equity and infrastructure, which are really exciting long-term sustainable investments.”

He added: “In the searches we have done, we’ve seen clear evidence of our success in making ourselves attractive as a preferred investor, both in the number of responses and the fees proposed. We’ve had positive feedback from managers on the robustness and detail of our search process. Now, of course, we will have to start moving to monitoring and managing these managers.”

Mark noted that in our responsible investment, led by Chief Responsible Investment Officer Faith Ward (left), Brunel has been active in collaborations with a number of partners. “I particularly want to highlight the training we’ve done with committees and employers which has led to improved mutual understanding.”

Aiming to exceed expectations in 2019

Mark reported that we’re well underway with the onboarding of our private markets administrator, Colmore. “This will greatly simplify the process of managing private markets assets. Our private markets team, led by Richard Fanshawe is actively looking for further investments – one notable observation is that we’re being taken very seriously as a potential partner by leading investment houses, perhaps exceeding our expectations.”

Mark spoke of the four Listed Markets projects that represent key deliverables for 2019: Emerging Markets, Global High Alpha, Liability Driven Investment and Diversified Growth Fund.

“On the responsible investment side, this will be our first year carrying out stewardship and voting with Hermes, our Proxy Voting and Engagement service provider, which will assist us in disclosure and reporting,” he said. “We’ve already been actively involved with a number of public consultations. It’s exciting to see companies really engaging with issues around stewardship, governance and responsible investment, and to have our fingerprints all over a lot of the important decisions being made. As you can see, we have a busy and challenging year ahead, but with your support it is one look forward to.”

People, operations & responsibility

Dawn Turner, CEO, provided a brief strategic forward look.

“I will focus on three areas – our people, our operations and our responsibility as a significant player in the investment and pensions world,” she said.

Our people

“We aren’t in our office today, which is a shame, as you would have seen how much the desks are now populated. The buzz and lively conversation  demonstrates how diverse our team is in terms of experience, thinking and the strengths each person brings to Brunel,” she said. “We are still recruiting, and will be around 40-strong eventually, with temporary and expert resource meeting demand in the interim.”

Strategically, she advised, we need to think at least three years ahead “with regards to development, welfare, retention and succession of our people and roles in Brunel. We have undertaken a resilience and succession planning exercise identifying the gaps we have and what succession requires us to do. Our remuneration policy requires us to benchmark each year and we are going through that exercise at the moment. This will add valuable information as we set out our workforce plans for the next three to five years. Our people are what make Brunel a success, and the Board and our senior managers are committed to treating all our staff fairly and equitably. We recognise good practice to be an attractive employer and ensure that our staff find working for Brunel a pleasure on a daily basis as well as being a place where they can move forwards in their careers.”

Our operations

Dawn mentioned Brunel’s ACS provided by FundRock, Colmore as our Private Markets administrator, in addition to State Street, our existing Administrator and Custodian and now depository for our ACS. “These are major, operational, outsourced areas in value and a necessity for being able to carry out our investment manager services to you,” she said. “We also have lower value contracts that are of equal importance, and they include our IT provider, our just selected HR Business Partner provision, our website, our building, our risk and performance system provider – I could go on.”

Our responsibility

As a £30 billion investment manager and asset owner, our responsibility is a key area for Brunel. “We play our role in influencing the companies we work with for the better,” Dawn said. “We expect companies that are part of our supply chain to be responsible and we assess this during procurement and monitor afterwards on a range of matters.”

She added: “Our passive investment manager LGIM and our engagement and proxy voting service provider Hermes enable us to realise the leverage of one voice and make the most of the benefit of economies of scale. Our position now to influence the long-term performance of our investments is better than ever before. We will provide you with transparent and informative reports on engagements made on our behalf by LGIM, Hermes and our investment managers and on occasions by ourselves too.”

To conclude, Dawn stated: “You can see that we are thinking ahead, looking for the best and influencing as strongly as we can to ensure access to long-term financially sustainable investments. These investment  will provide you with good performance and truly contribute to our desire to continue investing for a world worth living in.”