The Local Government Pension Scheme (LGPS) Pension Board met on Wednesday, 25 March 2026, to discuss the Pension Fund's Treasury Management Strategy for 2026-27, the draft Investment Strategy Statement, and the implementation of the Fit for the Future reforms. Key decisions included noting the Treasury Management Strategy and the draft Investment Strategy Statement, and noting the new legal and regulatory framework impacting the fund's operations.

Pension Fund's Treasury Management Strategy 2026-27

The Board noted the Pension Fund's Treasury Management Strategy (TMS) for 2026-27. This strategy outlines how the fund's operational cash will be managed to ensure sufficient funds are available to meet liabilities, including monthly pension payments. A key element of the strategy is the proposed increase in the cap on cash held by the pension fund from £59 million to £64 million for the 2026-27 period. This increase is based on the fund's audited asset value of £6.41 billion as at 31 March 2025, with cash representing 1% of this total. The strategy anticipates a potential decrease in employer contributions from April 2026 and a 3.8% increase in pension payments, necessitating the higher cash cap to manage cash flow effectively. The strategy adheres to the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice, with security of capital being the primary consideration, followed by liquidity and then yield.

Draft Investment Strategy Statement

The Board noted the draft Investment Strategy Statement (ISS) and the proposed approach to its consultation. The ISS, which must be reviewed at least every three years, sets out the fund's investment objectives, including its asset allocation, risk management, and approach to Environmental, Social, and Governance (ESG) factors. A significant development is the proposed adoption of the Border to Coast Responsible Investment (RI) policy as the fund's own RI policy. This decision was informed by a member survey which indicated strong support for responsible investment, with over 90% of respondents deeming it important. The Border to Coast RI policy aligns with the survey results and includes a 2050 net-zero target, as well as stronger provisions on areas like nature and biodiversity, and exclusions on controversial weapons and high-carbon industries. The ISS will be revised to align with new regulations from the forthcoming Pensions Bill, which will introduce a standardised template for strategic asset allocations and require a focus on local investment. The initial consultation on the revised ISS will be targeted at the largest employers within the fund, including the County Council, district and borough councils, the University of Hertfordshire, and Hertfordshire Constabulary, along with the Pension Board.

Fit for the Future Implementation

The Board noted the significant changes arising from the Pension Schemes Bill and the draft 2026 LGPS Regulations, collectively referred to as Fit for the Future. These reforms will reshape the LGPS landscape by formalising asset pooling and redefining responsibilities between pension funds and their pool companies. Under the new framework, pension funds will continue to set investment strategy, but the pool, Border to Coast Pensions Partnership (BCPP), will become responsible for all investment implementation, including portfolio construction, manager selection, and stewardship. This will be formalised through an Investment Management Agreement (IMA). The reforms also introduce new governance requirements, including the roles of a Senior LGPS Officer and an Independent Person, and strengthened training and oversight expectations for administering authorities. The implementation timetable indicates that BCPP will provide strategic advice from April 2026, with full implementation of investment strategy, including portfolio construction and cashflow management, expected by January 2027. The Board discussed the need for comprehensive training for members and officers to adapt to these evolving roles and responsibilities.

Investment Performance Report as at 31 December 2025

The Board noted the investment performance report for the quarter ending 31 December 2025. Overall, the Pension Fund's investments returned 2.6% during the quarter, underperforming its benchmark of 3.1%. Over the one-year and three-year periods, the fund also underperformed its benchmark. However, over the five-year and ten-year periods, the fund outperformed its benchmark. The report detailed the performance of individual investment managers, with several managers outperforming their respective benchmarks during the quarter, including Dodge & Cox (Global Equity) and Robeco (Emerging Markets Equity). The report also highlighted the impact of market volatility, particularly in equity and bond markets, influenced by geopolitical events and inflation concerns. Discussions also covered the potential addition of the discount rate as a comparator metric in future performance reports to provide better context.