Interview – The Royal County of Berkshire Pension Fund
INTERVIEW – DAMIEN PANTLING
“I don’t think anybody has been able to keep up with inflation and liability growth over the past three years.”
The head of the Royal County of Berkshire Pension Fund talks to Andrew Holt about infrastructure, future proofing, maverick managers, a pensions skills shortage and funding.
What’s in your portfolio? We have about £3bn in assets, but more than £3.6bn of liabilities. Right now, we have three broad asset classes: equity, debt and real assets. We have the highest combined exposure of public and private equities than any local government pension fund. On the debt side, we invest in private credit, multi-asset credit, investment grade and government lending. In real assets, we invest in real estate and infrastructure equity. It’s probably worth noting that the bulk of our real asset exposure comes from infra- structure equity. We don’t invest in hedge funds or other low beta diversifying strat- egies. That’s perhaps something to look at in the future.
You mentioned infrastructure equity, which is on the government’s agenda. Is that commitment a result of this, or is it some- thing you have always been keen to embrace?
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We are not driven by the government’s agenda at all. Infrastructure has been part of our strategy since 2016. It’s largely the other characteristics infrastructure brings, such as index-linked cashflows, and a sta- ble source of income which works with our long-term investment approach.
What is the philosophy that underpins your investment approach? We have several objectives in our invest- ment strategy statement, and a lot of them work in tandem with each other. But our philosophy can generally be categorized into three distinct areas.
The first is diversification. That comes from asset classes, styles, strategies and geographies. Second is a long-term approach or long-term focus. The opportunities that come with that are mainly in the liquidity premium. Third, it comes from good governance and an ESG focus, which speaks for itself. But, in essence, good companies will cre- ate and hold value over the longer term.
You have consistently matched the actuar- ial annualised benchmark of 6.5%: what do you attribute that to? We set that 6.5% benchmark in March 2019. Annualised performance from then until July 2023 has been just over 7.5%, on a money-weighted basis.
The best performing asset classes during this period have been private equity and infrastructure. Since we set that bench- mark, we’ve been able to achieve [the bench- mark] largely by maintaining our focus on growth assets and liquid alternatives. Generally, our performance has been held back by our exposure to real estate. We realigned our portfolio in March this year, not just for that basis, but that was one of the considerations.
In your investment statement you state the pension fund will progressively evolve to being cashflow negative. What is the rational here?
In simple terms, this is to do with the evo- lution of the membership and the
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