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UK’s Brunel awards State Street a $38bn custody mandate with ESG analytics component (Updated)

New pension pool makes key contract award

(Removes incorrect reference to State Street selling its UK Local Authority Universe service to PIRC.)

The Brunel Pension Partnership (BPP), one of the new eight pension pools formed by UK local government pension funds, has awarded a $38bn custody mandate – including ESG provisions – to State Street.

The US giant will now be the sole provider of a raft of administrative and custodian services to the recently formed £28bn investment firm created by the Brunel Pension Partnership Local Government Pension Scheme (LGPS).

Brunel CEO Dawn Turner hailed the “exciting” impact the partnership will have on integrating ESG reporting.

State Street will provide custody, fund accounting, performance management and foreign exchange, as well as data, risk and environmental, social, and governance (ESG) analytics.

It will, according to a Brunel statement, also provide custody and administration services “directly” to Brunel’s LGPS Clients, which includes: Cornwall Pension Fund, Buckingham County Council, Dorset County Council, Wiltshire Pension Fund, Devon Country Council, Avon Pension Fund, Environmental Agency Pension Fund, Gloucestershire County Council, Somerset County Council, and Oxfordshire County Council.

The assets are set to be transferred to State Street from November 2017.Speaking to RI, Mark Mansley, Chief Investment Officer at Brunel, said that the selection was made after an “extremely thorough” EU procurement process.

He said that three broad areas were looked at: 1) value for money, 2) technical capability and competence, and 3) the ability to work in partnership with the fund to build its requirements over time.

Due to a limited number of active custodians in the market, RI was told that the tender received only a “handful of responses”.

Brunel was advised by Alpha Financial Markets Consulting, the London-based wealth management advisory firm.

Andy Todd, Head of UK Pensions and Banks, Asset Owners Solution at State Street, said in a statement that the firm would combine Brunel’s ESG expertise with the bank’s “own suite of data innovation technologies to embed ESG in the investment decision-making process” – although further details weren’t disclosed.

The move to pool LGPS schemes was kick-started by former UK Chancellor George Osborne, who in 2015 asked schemes to come forward with proposals for pooling their assets. The Government has set a deadline of April 2018 for the pools to be established.

Currently, the UK’s 89 local government pension funds are in the process of pooling their assets.