The Merton Council Pensions Committee meeting scheduled for Wednesday 17 June 2026 was planned to review the fund's performance and discuss the upcoming audit plan. The agenda included the quarterly performance review, the 2025-2026 audit plan, and updates on investment performance and fund governance.

Quarterly Performance Review

The committee was scheduled to receive a report on the Merton Pension Fund's investment performance for the quarter ending March 2026. This report, prepared by the Fund's investment and performance consultants Hymans Robertson LLP, was intended to provide an analysis of the Fund's performance by asset class, comparing it against a customised benchmark over the quarter, the past year, and since inception. The report was expected to highlight market conditions during the period and offer information to support future actions, such as periodic rebalancing and the ongoing review of investment strategy.

Information regarding the fund's performance indicated that total assets decreased by approximately £1 million during the quarter, from around £1,047 million to £1,046 million. The total net return for the quarter was reported as -0.5%, which closely tracked the aggregate benchmark of -0.5%. Over the past 12 months, the Fund performed in line with its benchmark, but over a three-year period, it had underperformed, with a relative return of -1.7% per annum.

Specific asset classes were noted to have varied performance. Global equities experienced a mixed quarter, with some funds underperforming their benchmarks, while BlackRock tracker funds outperformed. Emerging markets had a positive quarter, outperforming their benchmark. The Diversified Growth mandate underperformed its benchmark over the quarter but had outperformed over the past 12 months. Property funds generally performed in line with or outperformed their benchmarks, while the Henley mandate underperformed. Most infrastructure mandates showed positive returns, with the exception of the Quinbrook Low Carbon Power Fund. Private credit mandates performed well, and the Risk Management Framework mandates experienced negative returns, which were in line with expectations given their recent launch. The Multi Asset Credit fund had a negative return and underperformed its benchmark.

The market background for the quarter indicated that global growth lost momentum, but overall growth for 2025 was positive. Inflation rose due to increased oil and gas prices, leading to a shift in market expectations regarding interest rates. Sovereign bond prices fell, and yields rose. Global equities fell in the first quarter, with energy stocks outperforming.

2025-2026 Audit Plan

The committee was also scheduled to review the audit planning report for the year ending 31 March 2026, prepared by Ernst & Young LLP. This report outlines the proposed audit approach and scope for the upcoming audit, in accordance with the Local Audit and Accountability Act 2014 and the National Audit Office's Code of Audit Practice.

Key audit risks identified for the 2025-26 audit included the presumptive risk of management override of controls and the valuation of complex and hard-to-value investments. The report noted that the Fund held a significant balance of Level 3 investments, such as unquoted pooled investment vehicles, property, and private debt, which require significant judgement from Investment Managers for valuation. There was also a risk associated with the valuation of Level 2 investments, where prices are not readily available in active markets. Additionally, the disclosure of the actuarial present value of promised retirement benefits under IAS 26 was identified as an area of inherent risk, particularly concerning the estimation process, data completeness, and the appropriateness of assumptions used by the actuary, Barnett Waddingham.

Materiality for the audit was proposed at £9.5 million, representing 1% of the Pension Fund's net assets in 2024-25. Performance materiality was proposed at £7.2 million (75% of planning materiality). The auditors would report uncorrected misstatements over £0.5 million.

The audit team, led by Kevin Suter, was expected to involve specialists from EY's Centre of Excellence for Pensions and the EY Pension Advisory Team, as well as PwC as the consulting actuary to the NAO. The audit timeline indicated key communication and deliverable dates throughout the 2025-26 financial year.

Other Scheduled Discussions

The agenda also included a review of the minutes from the previous meeting held on 09 February 2026. Further items scheduled for discussion, some of which may have been considered in private session, included an Investment Performance Update for March 2026, an update on the LCIV Pool, a review of the Merton Pension Fund Governance Review Action Plan, and Pension Administration Performance. The committee was also to consider future meeting dates.