The Merton Council Pensions Committee convened to discuss the fund's performance, receive an update on the external audit, and review the minutes from a previous meeting. Some items, including discussion of the triennial valuation results, were scheduled to be discussed in a session that was closed to the public.

Quarterly Performance Review

The committee was scheduled to review the investment performance of the Merton Pension Fund for the quarter ending 30 June 2025. According to the Merton Pension Fund Performance Report - June 2025, the fund's total assets increased from approximately £955 million to £988 million during the quarter.

The report prepared by Hymans Robertson, the fund's investment and performance consultants, noted that the fund recorded an absolute return of +4.6% but underperformed its aggregate benchmark by 0.1%. Over longer periods, the fund also underperformed its benchmark, with relative returns of -1.6% and -2.1% per annum over 12 months and 3 years respectively.

The report also included commentary on specific asset classes:

• Global equities: Mainly due to a pause in US 'Liberation Day' tariffs and trade deals being made.
• Emerging Markets: The Emerging Markets mandate had a positive performance over the quarter, broadly in line with benchmark.
• Diversified Growth: The Diversified Growth mandate produced positive returns however, it continues to underperform its benchmark over longer time periods.
• Property/Social Impact: delivered a positive return over the period, although all asset classes underperformed their respective benchmarks.
• Infrastructure and Private Credit: mandates delivered mixed performance although none performed particularly well.
• Risk Management Framework: delivered performance to benchmark except for the LCIV Insight Long Duration Buy and Maintain fund. However, performance is in line with expectations as the fund was only launched in December 2023 and therefore has a short track record.

The report also provided an overview of market conditions, noting that global equities had rebounded after a volatile first half of the year, and that record highs were further supported by geopolitical relief, including news of a late June ceasefire between Israel and Iran.

External Audit Progress Update

The committee was scheduled to receive an update on the 2024-25 external audit from Ernst & Young (EY). The Merton Pension Fund Provisional Audit Results Report 24-25 summarised the status of the audit and contained findings related to areas of audit emphasis, views on accounting policies and judgements, and material internal control findings.

EY's report noted that audit work was substantially complete, pending:

• Receipt of the annual report for consistency checks.
• Clearance of queries relating to investment disclosures.
• Completion of subsequent event disclosures.

The report indicated that no uncorrected misstatements affecting the net asset statement and fund account had been identified, but disclosure misstatements in several notes to the financial statements had been identified.

The report also detailed EY's assessment of key risk areas, including:

• Fraud risk - presumptive risk of management override of controls
• Significant risk - Valuation of complex (Level 3) investments¹ (unquoted investments)
• Inherent Risk 1 - Valuation of Level 2 investments
• Inherent Risk 2 - IAS26 Disclosure – Actuarial Present Value of Promised Retirement Benefits

EY's report included a table that summarised their views on the effectiveness of the council's arrangements to support external financial across a range of relevant measures. The timeliness of the draft financial statements and the delivery of working papers were rated as effective, but the quality and completeness of the draft financial statements was considered to require improvement.

Other Business

The committee was also scheduled to review the minutes of the previous meeting held on 26 June 2025.