The Pensions Committee of Hertfordshire Council met on Tuesday 17 March 2026 to discuss the fund's treasury management strategy, investment strategy, and the implementation of the Fit for the Future reforms. Key decisions included approving the treasury management strategy for 2026-27, with a £64 million cap on cash held, and agreeing to consult on a revised investment strategy statement that aligns with the Border to Coast Responsible Investment Policy. The committee also noted the significant changes to governance and operational responsibilities arising from the Pension Schemes Bill and associated regulations.

Pension Funds Treasury Management Strategy 2026-27

The committee approved the proposed 2026-27 Treasury Management Strategy (TMS) for investing pension fund cash, which includes a cap of £64 million on the amount of cash held by the fund. This strategy ensures sufficient funds are available to meet statutory liabilities, such as monthly pension payments. The strategic allocation to cash remains at 1% of the total pension fund assets, which equates to approximately £64 million based on the fund's £6.41 billion audited asset value as of 31 March 2025. The proposed cap represents an increase from the previous year's £59 million. This adjustment is intended to assist officers in managing cash availability, particularly as employer contributions are anticipated to fall from April 2026, while pension payments are expected to increase by 3.8% due to the September 2025 Consumer Price Index rise. The strategy prioritises the security of invested capital, followed by liquidity, and then yield, reflecting the fund's need to meet short-term obligations.

Draft Investment Strategy Statement

The committee approved the draft Investment Strategy Statement (ISS) for consultation with employers of the Hertfordshire Pension Fund. This revised ISS incorporates the Border to Coast Responsible Investment Policy, which was found to align strongly with member survey results and includes enhanced provisions on areas such as nature and biodiversity, and exclusions for controversial weapons and high-emitting carbon industries. The strategy also reflects the upcoming changes from the Pension Schemes Bill, which will introduce a new template for stating strategic asset allocations and require a comprehensive revision of the ISS. This revised ISS will be brought to the committee in July 2026, following workshops with members on local investment. The initial consultation on the draft ISS will be a light touch approach, targeting 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 committee noted the significant changes arising from the Pension Schemes Bill and the draft 2026 LGPS Regulations, which will reshape the fund's investment arrangements and its relationship with Border to Coast Pensions Partnership (BCPP). Under the new framework, the committee will retain responsibility for setting investment strategy, including the Strategic Asset Allocation (SAA), while BCPP will be responsible for all investment implementation, including portfolio construction, manager selection, rebalancing, cashflow management, and stewardship. The committee agreed to delegate to the Head of Pensions, or the Director of Finance in consultation with the Chair of the Pensions Committee, the authority to enter negotiations and settle an Investment Management Agreement (IMA) with BCPP. This IMA is crucial for the fund to comply with the anticipated Local Government Pension Scheme (Pooling, Management and Investment of Funds) Regulations 2026. The committee also noted wider governance changes, including new statutory roles for a Senior LGPS Officer and an Independent Person, and strengthened training and oversight expectations.

Investment Performance Report as at 31 December 2025

The committee noted the investment performance report for the quarter ending 31 December 2025. The overall performance of the Pension Fund during this quarter was 2.6%, which underperformed against its benchmark of 3.1%. Over the one-year and three-year periods, the fund also underperformed its benchmark. However, over the longer term, the fund has outperformed its benchmark over five and ten-year periods. Several investment managers outperformed their respective benchmarks during the quarter, including Dodge & Cox (Global Equity), Robeco (Emerging Markets Equity), and UBS (Global Climate Aware Equity). Conversely, managers such as Baillie Gifford (Global Equity) and UBS (Overseas Equity) underperformed their benchmarks. The report highlighted that market conditions, including geopolitical events in Venezuela, Greenland, and Iran, have introduced volatility, but the fund's diversified approach is expected to provide balance. The long-term investment strategy remains focused on achieving returns over 10-20 years, with short-term market fluctuations not expected to necessitate immediate changes to the investment strategy.