The Pensions Committee of Merton Council met on Tuesday 15 September 2026. The meeting's agenda included a review of the fund's performance, an update on investment performance, and discussions on the risk management strategy and administration performance.

Quarterly Fund Performance Review

The committee was scheduled to review the quarterly performance of the Merton Pension Fund, as prepared by LCIV. This report was intended to provide a comprehensive assessment of the fund's activities and investment performance for the quarter ending 30 June 2026. The report was expected to offer insights into investment performance, key developments, and the factors influencing the fund's results.

The fund's total assets increased by approximately £70 million over the quarter, reaching £1,101.0 million by 30 June 2026. The Strategic Asset Allocation's expected return is 5.0% over the medium term. Performance exceeded this level over the quarter, with a return of 6.1%, and over the 12-month period, with a return of 12.8%. Over longer periods, the fund returned 9.7% per annum over three years and 4.6% per annum over five years, exceeding its objective over three years but remaining below target over five years. While performance was solid on an absolute basis, relative returns were slightly below the benchmark, attributed to issues in private markets and the underperformance of active equity managers relative to their benchmarks.

The report detailed the performance across various asset classes:

• Listed Equity: This remained the largest allocation at 38.1% of assets, above the Strategic Asset Allocation target of 32.0%. The portfolio returned 15.1% against a benchmark of 16.0% for the quarter. The LCIV Emerging Market fund performed well, while the LCIV Sustainable Equity and LCIV Global Alpha Growth Paris Aligned funds underperformed their respective benchmarks.
• Property: This asset class represented 8.9% of Scheme assets, close to the target of 9.5%. The portfolio returned 0.5% for the quarter, underperforming its benchmark of 1.5%. Performance was affected by weaker returns from the Henley Secure Income Property Fund II.
• Infrastructure: Accounting for 13.2% of assets against a target of 14.5%, this asset class plays a role in the Scheme's long-term diversification strategy. The JP Morgan fund delivered positive quarterly performance but lagged its benchmark over one and five years.
• Other Alternatives: This represented 6.2% of assets, above the target of 4.0%. The LCIV Absolute Return Fund returned -1.3% for the quarter, underperforming its benchmark of 1.7%. A commitment of £10 million was made to the LCIV Nature Based Solutions fund during the quarter.
• Private Credit: At 4.9%, this allocation remained below the Strategic Asset Allocation (SAA) target of 6%. Performance on underlying fund investments tracked in line with expectations. A commitment of £30 million was made to the LCIV Private Debt 2 fund.
• Credit: This accounted for 22.5% of assets, below the SAA target of 29.0%. The LCIV MAC fund performed strongly, returning 3.7% against a benchmark of 2.0%.
• UK Government Bonds: Representing 4.2% of assets against a target of 5.0%, this allocation provides a defensive component. The Allspring Gilts fund returned 3.6% for the quarter, in line with its benchmark.
• Cash: This represented 1.9% of assets, above the target of 0.0%.

The report also included a detailed market update, noting that investors navigated themes such as the U.S.-Iranian conflict and the AI boom. Inflation reaccelerated due to rising energy prices, prompting central banks to pivot away from easing monetary policy. Equity markets performed strongly, particularly in Emerging Markets, driven by AI and technology. Government bond markets were volatile, with yields increasing.

Other Agenda Items

The agenda also included a review of future meeting dates, consideration for the exclusion of the public for certain exempt reports, and a workplan. A verbal update was scheduled for the Risk Management Strategy, and the committee was to receive an update on Administration Performance. Finally, the appointment of an Independent Advisor was scheduled for discussion.