As Brunel Pension Partnership prepares to disband, private markets portfolio manager Jaime Alvarez-Dominguez reflects on the challenges it faced, what it achieved and lessons for the next phase of LGPS consolidation.
As the UK’s Local Government Pension Scheme (LGPS) enters a new phase of consolidation, one of its most distinctive experiments is coming to an end.
Brunel Pensions Partnership – one of eight pools formed less than a decade ago to manage assets across 10 southwest England funds – is now being wound down under government pressure to further rationalise the system to six pools. Its assets and clients are being redistributed across three larger pools, bringing an abrupt close to a unique model that had produced numerous positive outcomes.
For Jaime Alvarez-Dominguez, who leads sustainable infrastructure and private equity strategies, the timing is striking. “We are very happy, not only with our results, but also with the impact that we had in the ecosystem,” he says. “But the investment and monitoring activity ends this quarter.”
Under the transition, Brunel’s client funds and underlying investments are being redistributed rather than liquidated outright. Six of Brunel’s partner funds are moving to LPPI, three to LGPS Central and one to London CIV, with their private markets holdings largely transferring alongside them.
While this avoids fire sales, it also means that relationships, governance rights and sustainability frameworks developed by Brunel over years of collaboration will now be shared across multiple successor organisations.
Yet Brunel’s story is less about its ending than what it reveals about how institutional capital can be deployed – and what may be lost as scale becomes the dominant objective.
Scale is not a strategy
Pooling was originally designed to solve a clear problem: fragmentation. More than 100 LGPS funds were operating independently, limiting access to talent and driving inefficiencies.
But from the outset, Brunel’s founding funds shared a broader ambition. “They shared the view that fiduciary duty wasn’t just limited to medium-term returns,” Alvarez says. “It needs to incorporate a wider range of risks, such as climate change – especially since pension funds have longer investment horizons.”
It also set Brunel apart; its philosophy shaped investment decisions, governance structures and manager selection.
Now, however, the next phase of consolidation risks reframing the objective. Larger pools create opportunities, particularly around reducing cost, but they also introduce trade-offs. “Increasing size definitely creates opportunities,” Alvarez says. “The question is, what do you do with those opportunities?”
The simplest answer is scale for its own sake: larger ticket sizes, fewer managers, lower fees. But that approach carries consequences. “When you start to move more to large caps, the bigger that you go, the more likely it is that the managers are less aligned with you,” he warns.
Selective sustainability
Brunel’s approach to responsible investment was not framed as a constraint on returns, but as a way to enhance them. “We wanted to do something that will be good for the society members will retire into,” Alvarez says. “But the main goal was still to provide financial returns for the members.”
That translated into a highly selective investment strategy. The team leaned into areas where structural trends and sustainability aligned – while avoiding segments where the economics were less convincing.
A case in point was hydrogen. Despite strong policy support and market enthusiasm, Brunel largely stayed on the sidelines. “We said ‘no’ to most of the things offered because we didn’t think the economics were there,” Alvarez says.
Instead, the programme focused on areas such as energy storage and transport electrification – sectors where demand dynamics and cost curves offered clearer visibility on returns.
The same thinking extended to natural capital. In timberland investments, for example, Brunel pursued strategies that combined biodiversity gains with optionality around carbon markets – creating upside without relying entirely on it. “We feel quite comfortable because we have the plan B,” Alvarez says. “If carbon markets are not there, we can still get returns from timber.”
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Culture matters
One of Brunel’s more distinctive achievements was the way it built investment capability despite operating under public-sector constraints.
Like many LGPS organisations, Brunel could not compete with private equity firms or infrastructure managers on pay. Instead, it focused on flexibility, culture and mission alignment. “We had to get people that maybe had one year or just an internship or junior position, and work very hard on training them,” Alvarez says.
Junior staff were given early exposure to committees and encouraged to learn openly rather than operate within rigid hierarchies. “We just need to progress and train people,” Alvarez says. “Going to a committee and making a mistake is how you learn not to make a mistake in the next one.”
The team adopted a distributed structure during the pandemic, with senior professionals based across England rather than concentrated in the Southwest. That allowed Brunel to recruit experienced investors who valued flexibility and purpose alongside compensation. “We ended up with a team that was mainly based in Bristol, a little more distributed through England,” Alvarez says, including people in London, Essex, Derbyshire and Edinburgh.
The approach helped Brunel build a functioning private markets platform with relatively limited resources. But it also highlighted a wider challenge for the LGPS: attracting and retaining specialist private markets talent remains difficult, regardless of scale.
Partnerships can outperform
One of the defining features of Brunel’s private markets programme was its pragmatic approach to building capability.
Different asset classes evolved in different ways. In real estate and private debt, Brunel initially relied more heavily on external advisors before gradually internalising greater responsibility as the team developed. Infrastructure and private equity followed the opposite path: the team began by selecting funds directly before later expanding its use of specialist partners.
“In general, in all private markets, there has been a tension between doing things ourselves and relying on external partners,” Alvarez says.
That shift was partly driven by talent constraints, but also by the increasing complexity of the market. “We needed to be more sophisticated with things like secondaries and co-investments,” he says.
Rather than fully outsourcing investment decisions, Brunel adopted a partnership model – working alongside managers and advisors while retaining control over strategy and portfolio construction. “We never gave a discretionary mandate to somebody and asked them to get on with it,” Alvarez says. “We always worked with them.”
The approach allowed Brunel to broaden its opportunity set, access specialist expertise and diversify across strategies and geographies without overextending internal resources. It also reduced concentration risk at a time when some larger pension investors were pursuing more direct investment models.
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Shaping markets
Despite its size, Brunel had an outsized influence on the managers it worked with. Rather than accepting standard fund offerings, the team pushed for more rigorous approaches to sustainability – particularly around measurement and reporting.
“We made sure that we were working with GPs that measure the right KPIs,” Alvarez says, pointing to metrics such as carbon intensity and biodiversity.
In some cases, that meant acting as an anchor investor and shaping fund design from the outset. In others, it involved working with advisors to develop new frameworks.
This extended Brunel’s impact beyond its own portfolio. “What we created was multiplied – because other investors adopted it,” Alvarez says.
This kind of influence – subtle but cumulative – is one of the less visible contributions asset owners can make. It also depends heavily on continuity of relationships. As Brunel’s assets are redistributed, that continuity may be harder to maintain. “There was a long process of monitoring… a certain level of trust was built,” Alvarez says.
Costs are not the objective
The final lesson is perhaps the most pointed. As consolidation progresses, cost reduction is likely to become a central focus.
Larger pools can negotiate lower fees and operate with fewer managers, delivering headline savings. But Alvarez cautions against allowing cost to dominate decision-making. “Cost is only a way to get to returns,” he says. “It is not the main objective.”
There are areas – such as investing in smaller, local managers – where higher costs may be justified by better alignment or stronger performance potential. Larger pools, in theory, have the capacity to support such programmes – but this requires a deliberate choice.
“You must decide that cost is not the only thing that you care about,” Alvarez says. “Without that, there is a risk that consolidation leads to a more standardised, less differentiated investment approach that prioritises efficiency over innovation.”
An unfinished experiment
Brunel’s closure is not the result of failure. By Alvarez’s account, the programme delivered both financially and in terms of its broader objectives. Instead, it reflects a structural shift in how the LGPS is organised – one that places greater emphasis on scale and centralisation.
Whether that shift ultimately strengthens the system remains an open question. For Alvarez, the answer will depend less on size than on how that size is used. “The question is what they do with those opportunities,” he says.
Brunel offered one version of that answer: a model built on selectivity, partnership and a belief that sustainability can drive returns. As the system evolves, the challenge will be to retain those elements – without losing them in the pursuit of scale.