The Merton Council Pensions Committee met on Wednesday 17 June 2026 to review the fund's investment performance and audit plan. Discussions were scheduled to cover the quarterly performance review, the 2025-2026 audit plan, and updates on the LCIV Pool and pension administration.

Quarterly Performance Review

The committee was scheduled to receive an update on the Merton Pension Fund's investment performance for the quarter ending March 2026. The report, prepared by the Fund's investment and performance consultants Hymans Robertson LLP, was intended to provide an analysis of the Fund's performance by asset class against its customised benchmark. It was also set to cover performance over one year and since inception, offering information to support future actions such as periodic rebalancing and the ongoing review of investment strategy.

The report indicated that the Fund's total assets decreased by approximately £1 million over the quarter, from around £1,047 million to £1,046 million. The total net return for the quarter was -0.5%, which matched the aggregate benchmark. Over the 12-month period, the Fund performed in line with its benchmark, but over three years, it had lagged its benchmark with relative returns of -1.7% per annum.

Specific asset classes were highlighted for their performance:

• Global equities experienced a mixed quarter. The LCIV RBC Sustainable Equity Fund and the LCIV Baillie Gifford Global Alpha Growth Paris Aligned Fund both underperformed their benchmarks. The latter underperformed by 6.7% over the quarter. In contrast, the BlackRock tracker funds outperformed their respective benchmarks.
• The Emerging Markets mandate showed positive performance over the quarter (+4.8%), outperforming its benchmark by 2.4%.
• The Diversified Growth mandate underperformed its benchmark by 0.6% in Q1 2026. While it had outperformed over the past 12 months, it continued to underperform its benchmark over three and five years.
• Property funds generally recorded positive absolute returns, performing in line with or outperforming their benchmarks. However, the Henley mandate underperformed its benchmark by 1.3% over Q1.
• Most Infrastructure mandates delivered positive returns, with the Quinbrook Low Carbon Power Fund being the exception.
• Private Credit mandates had a positive quarter, with all funds either performing in line with or outperforming their benchmarks.
• The Risk Management Framework mandates experienced negative absolute returns, which were noted as being in line with expectations given the fund's launch in December 2024.
• The Multi Asset Credit fund produced a negative absolute return over the quarter and underperformed its benchmark by 3.1%.

The report also provided market background for Q1 2026, noting that global equities fell by 2.4% due to declines in March. Emerging markets outpaced developed markets, supported by a weaker dollar and a rebound in China. The MSCI UK Property Total Return Index rose by 1.4% in Q1. The report detailed the impact of geopolitical events, such as the conflict, on energy prices and inflation, leading to shifts in market expectations for interest rates.

The asset allocation was also reviewed, with Global Equities noted as the most overweight class relative to its benchmark (+2.6%). RMF/Corporate Bonds were underweight (-6.3%), with officers actively working to address this. The report mentioned that the target allocations were agreed in 2023 as part of the last investment strategy review.

2025-2026 Audit Plan

The committee was scheduled to review the 2025-2026 Audit Plan presented by Ernst & Young LLP. This report outlined the proposed audit approach and scope for the year, in accordance with the Local Audit and Accountability Act 2014 and the National Audit Office's Code of Audit Practice.

Key areas of focus for the audit were identified as:

• Presumptive risk of management override of controls: This is a standard fraud risk that the audit approach would address through mandatory procedures, regardless of specifically identified risks.
• Valuation of complex and hard to value investments: This was identified as a significant risk due to the Fund holding a substantial balance of Level 3 investments, such as unquoted pooled investment vehicles, property, and private debt, where significant judgements are made by Investment Managers. The report noted that as at 31 March 2025, Level 3 investments totalled £210 million.
• Valuation of other investments (Level 2 and Level 3): This was considered an inherent risk, with Level 2 assets valued using observable inputs for similar assets. As at 31 March 2025, Level 2 investments held by the Fund amounted to £16 million.
• IAS26 Disclosure – Actuarial Present Value of Promised Retirement Benefits: This was identified as an inherent risk, relating to the estimation process, completeness and accuracy of data, and the appropriateness of assumptions selected by the actuary, Barnett Waddingham.

The audit plan detailed the proposed audit response to these risks, including analytical procedures, review of fund manager valuations, and engagement with specialists. Materiality for the audit was set at £9.5 million, representing 1% of the Pension Fund's 2024/25 net assets, with performance materiality set at £7.2 million.

The audit team, led by Kevin Suter, was expected to involve specialists from EY's Centre of Excellence – Pensions and EY Pension Advisory Team, as well as PwC as the consulting actuary to the NAO. The timetable for communication and deliverables was also provided, with the audit report expected by 30 November 2026.

The LCIV Pool Update

A report was scheduled to provide an update on the LCIV Pool¹. This is a pooled investment vehicle established by Local Government Pension Scheme (LGPS) funds to achieve economies of scale and improve investment outcomes.

Pension Administration Performance

The committee was also set to receive a report on Pension Administration Performance, which would likely detail the efficiency and effectiveness of the administrative services provided to the Pension Fund.