The Local Pension Committee of Leicestershire Council met on Friday, 3 July 2026, to discuss various aspects of the Pension Fund's investments, governance, and risk management. Key decisions included approving revised Terms of Reference for the committee, appointing a Shareholder Representative for LGPS Central Ltd, and noting reports on responsible investment, cash management, and investment valuations.

LGPS Central Presentation

The committee noted the report and presentation from LGPS Central, which provided an update on the public markets investments held by the Fund. This included details on the global active equity fund, global climate multi-factor fund, global investment grade bond fund, and the global multi-asset credit fund. The presentation also covered the development of investment products to meet various investment strategies and the implementation of these strategies. The report highlighted that as of 31 March 2026, approximately £4.6 billion of the Fund's assets, representing 62% of its total assets, were invested with LGPS Central products or those where they have investment oversight. Uncalled commitments of over £900 million are expected to increase this pooled exposure over time. The committee was informed about the ongoing progress in adapting to the 'Fit for the Future' (FFTF) regulations, which mandate that all investment mandates will come under the pool's oversight by 1 April 2026. This includes the Pension Schemes Act 2026, which received Royal Assent on 29 April 2026. The report also detailed the expansion of LGPS Central, which now includes fourteen LGPS funds collectively managing over £100 billion in assets.

Responsible Investment Update

The committee noted the outcome of the responsible investment survey and approved the Responsible Investment Plan for 2026/27. They also noted the update on the Fund's quarterly voting and stewardship activities. The report detailed that the Fund's approach to responsible investment involves integrating financially material Environmental, Social, and Governance (ESG) factors into investment processes. This is considered a core part of the Fund's fiduciary duty. The committee was presented with the Fund's voting report for January to March 2026, which covered approximately 43.3% of the Fund's assets. LGPS Central voted on 9,992 resolutions across 918 meetings, opposing resolutions in 502 meetings. The majority of votes against management (42%) were related to board structure, including issues such as director over-commitment, diversity, and inadequate management of climate risk. The report also highlighted engagement activities by Legal and General Investment Management (LGIM) and the Local Authority Pension Fund Forum (LAPFF). A significant point raised was a letter from the Local Government Minister, Alison McGovern MP, stating that decisions on boycotts, divestment, and sanctions are matters for central government, not local authorities.

Cash Management Policy and Forecast

The committee noted the report on the Fund's cash management policy and forecast. The report detailed how the Leicestershire County Council Pension Fund manages its cash balances, which have been elevated due to a strategic shift towards private market investments. As of 31 March 2026, the Fund held £505 million in cash, representing 7.4% of total assets. This cash position is expected to reduce gradually to approximately £235 million by the end of the financial year 2026/27. The report outlined the Fund's Cash Management Strategy (CMS), which prioritises security, liquidity, and then yield. The current cash is held in money market funds and fixed-term investments, earning a weighted average interest rate of 3.99%, ahead of the Bank of England base rate of 3.75%. The report also detailed the Fund's Strategic Asset Allocation (SAA) for 2026, which includes a 0% target for investment cash, with tolerance ranges allowing for flexibility. The increase in cash balances is a deliberate consequence of the long-term strategy to increase allocations to private markets, which involves capital calls over several years.

Valuation of Pension Fund Investments

The committee noted the report providing an update on investment markets and the total value of the Fund's investments as at 31 March 2026. Global investment markets delivered positive returns over the year, with global equities performing strongly, up nearly 20% according to the MSCI World Index (GBP). Fixed income also saw positive returns, with the Bloomberg Global Aggregate Index USD unhedged returning 4.3%. Commodity markets were substantially stronger, with the iShares S&P Commodity Indexed Trust benchmark achieving a 43% one-year return in USD. The report highlighted that market returns remained concentrated, with technology and AI-related themes playing an outsized role in equity market performance. Geopolitical risks, particularly in the Middle East, have contributed to fluctuations in energy prices and concerns about inflation persistence. The report also detailed the Fund's overall investment performance, showing a 1-year return of +10.5% against a benchmark of +12.6%. Over three and five years, the Fund's returns were +7.9% and +7.0% per annum, respectively. The report also discussed the progress of investment pooling, with all of the Fund's assets now having a management agreement with LGPS Central for ongoing oversight and decision-making.

Fit for the Future Update

The committee noted the report providing updates on regulatory developments relating to 'Fit for the Future' (FFTF) and governance arrangements for LGPS Central. The Pension Schemes Act 2026 received Royal Assent on 29 April 2026, with new statutory instruments coming into force on 30 June 2026. These include the Local Government Pension Scheme (Pooling, Management and Investment of Funds) Regulations 2026 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2026. Key changes include an extension of the deadline for the first Investment Strategy Statement publication to 31 March 2027 and the removal of the requirement for an Independent Person to be a non-voting Member of the Pension Fund Committee, allowing them to act as an advisor. The report also highlighted that guidance is awaited on the role of the Senior LGPS Officer and the appointment of an Independent Person, with a role description drafted for the latter. The committee was informed that all resolutions were agreed by shareholders at the 23 March 2026 Company Meeting of LGPS Central, including the approval of the Strategic Business Plan 2026-2029 and Budget 2026-27.

Risk Management and Internal Controls

The committee noted the report on risk management and internal controls for the Pension Fund and approved the updated risk register. The report detailed 19 risks across six categories: Investment, Liability, Employer, Governance, Operational, and Regulatory. The risk register is updated to reflect changes in scores and controls, with a focus on the implications of 'Fit for the Future'. Notable updates include changes to Risk 2 (Market returns below expectations) and Risk 3 (Failure to account for all risks in asset allocation), reflecting the evolving role of LGPS Central and the ongoing review of governance arrangements. Risk 10 (Sub-funds of individual employers not monitored) saw its score reduced due to the approval of the Funding Strategy Statement. Updates were also made to controls for risks related to immediate payments, death of a pensioner, the McCloud case, and the national dashboard project. The report indicated that the regulatory structure required by the government by 1 April 2026 had been achieved, but guidance is still awaited on several points.

Terms of Reference Update

The committee agreed to the revised Terms of Reference for the Local Pension Committee. The revised terms reflect updates related to 'Fit for the Future' developments, including the role of the Independent Person and the appointment of a Shareholder Representative for LGPS Central Ltd. The committee formally delegated the role of Shareholder Representative to Declan Keegan, Director of Corporate Resources and Deputy Chief Executive & s.151 officer, with Simone Hines, Assistant Director Finance, Strategic Property and Commissioning, appointed as Deputy Shareholder Representative. This delegation aligns with legal advice received and ensures compliance with evolving governance requirements. The Shareholder Representative will be authorised to exercise the Administering Authority's shareholder decision-making powers in relation to LGPS Central Ltd and will report back to the committee on shareholder matters. The revised Terms of Reference also clarify membership and roles within the Investment Sub-Committee and the relationship with the Local Pension Board.