Brent Pension Fund is set to implement a significant shift in its investment strategy, moving towards a greater emphasis on protection assets and reducing exposure to growth assets. The move, detailed in a recent Pension Board meeting, aims to align the Fund's investments with its improved funding position and evolving market conditions.
The 2025 triennial actuarial valuation revealed a substantial improvement in the Fund's financial health, with its funding level rising from 87% in 2022 to 113% as of March 2025. This surplus has led to a projected cut in employer contribution rates from 30.5% to 23% from April 2026.
Following this positive valuation, the Fund's investment strategy review, conducted by advisors Hymans Robertson, recommended a reduction in exposure to growth assets. Key proposals include decreasing the allocation to global equities and increasing allocations to private equity and natural capital. The Fund will also increase its exposure to income assets, specifically infrastructure and property, while reducing its allocation to multi-asset funds.
The rationale for reducing exposure to multi-asset funds is to rebalance the portfolio towards the new long-term strategic target, with proceeds being reinvested in protection assets like fixed interest gilts and multi-asset credit. The strategy review recommended reducing the allocation to multi-asset funds to 5%.
To bolster protection against market volatility, the Fund plans to increase its allocation to fixed interest gilts and multi-asset credit. The strategy review recommended to increase the total allocation to these protection assets to 20%. These changes are part of a broader strategy to support local investment initiatives and climate objectives, aligning with government proposals.
The new investment strategy aims to support local investment initiatives by increasing allocations to private equity, as this is likely to be a vehicle for deploying assets towards local investment as proposed by the government. For climate objectives, the strategy recommends quantifying the reduction in carbon emissions achieved by restructuring global equity mandates and reviewing the 'Net Zero Roadmap' to develop an action plan for achieving a net zero position. Additionally, a new allocation to Natural Capital is proposed to help achieve net zero ambitions.
Private equity investments are illiquid and require capital commitment for long periods, with the expectation of a return premium above listed equities. Natural Capital is described as offering diversification benefits away from traditional asset classes and attractive returns, potentially supporting net zero ambitions.
The implementation of the new investment strategy will be managed by the London Collective Investment Vehicle (LCIV) from April 2026. An earmarked portfolio of liquid assets, including equities, bonds, and cash, will be established to fund future private markets investments. This approach aims to ensure the Fund can meet capital calls from managers while maintaining an appropriate risk and return profile. The earmarked portfolio will be invested in a blend of equities, bonds, and cash, and its balance can be reviewed periodically based on liquidity needs and expected capital calls.
The full implementation of the new investment strategy will take a period of years, particularly for allocations to private markets such as infrastructure, property, and private debt funds. This is because these allocations always take a long period of time to build up.
The Fund reported positive returns for the second half of the 2025-26 financial year, with its valuation reaching £1.49 billion. Global equities were a strong performer, contributing significantly to the overall return of 9.4% for the half-year, outperforming its benchmark by 0.5%. A new allocation to the Legal and General Future World Index Fund was also implemented, which is expected to reduce the Fund's carbon emissions.
