The Local Government Pension Scheme (LGPS) Local 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. The Board noted the proposed treasury management strategy, which included an increase in the cap on cash held by the pension fund, and discussed the draft investment strategy statement, agreeing to consult with key employers. Significant time was also dedicated to understanding the implications of the Pension Schemes Bill and new LGPS regulations on the fund's governance and its relationship with the Border to Coast Pensions Partnership (BCPP).

Pension Fund's Treasury Management Strategy 2026-27

The Board noted the Pension Fund's Treasury Management Strategy for 2026-27. This strategy outlines how the fund manages its operational cash to ensure sufficient funds are available to meet liabilities, including monthly pension payroll. A key proposal within the strategy was to increase the cap on cash held by the pension fund from £59 million to £64 million. This increase is based on the fund's audited asset value of £6.41 billion as at 31 March 2025, with a strategic asset allocation to cash of 1%. The report highlighted that contributions from employers are anticipated to fall from April 2026, while pensions paid are expected to increase by 3.8% based on the September 2025 Consumer Price Index. Rob McCarthy, who presented the report, explained that while the fund might become operationally cash flow negative, this could be managed by drawing on cash held with custodians. He also noted that a more comprehensive discussion on the fund's overall cash flow negativity would be covered later in the agenda concerning private market commitments.

Draft Investment Strategy Statement

The Board was presented with the draft Investment Strategy Statement (ISS), which must be reviewed at least every three years. Phillip Prasad explained that the current ISS needed to be updated to comply with the 2016 regulations and would be further revised to align with the upcoming Pensions Bill. A key amendment proposed to the strategic asset allocation was the reintroduction of hedge funds and insurance-linked strategies, now classified as liquid diversifiers, with a shift in allocation from private debt and index-linked gilts. The Board was informed that the fund had conducted an ESG and RI survey, with over 90% of respondents deeming responsible investment important. Based on these results and aligning with the views of committee and board members, officers recommended adopting Border to Coast's responsible investment policy. This policy aligns with the survey results, incorporates the 2050 net zero target, and includes stronger provisions on nature, biodiversity, and exclusions on controversial weapons and high-emitting carbon sources. Following legal advice, the intention is to consult with the largest employers in 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

Phillip Prasad also presented a report on the Fit for the Future implementation, detailing changes arising from the Pension Schemes Bill and draft 2026 LGPS regulations. These reforms will significantly alter the LGPS landscape, formalising the requirement for administering authorities to work through a single pool, with Border to Coast Pension Partnership (BCPP) becoming the principal strategic investment advisor. Under the new framework, funds will set investment strategy, while BCPP will be responsible for portfolio construction, manager selection, rebalancing, cashflow management, and stewardship. The report outlined new governance requirements, including the roles of a Senior LGPS Officer and an Independent Person, and strengthened training and oversight expectations. The Board was informed that BCPP would require an Investment Management Agreement (IMA) with partner funds to deliver these services. The implementation timetable indicates that BCPP will provide strategic advice from 1 April 2026, with full implementation of investment strategy, including portfolio construction and rebalancing, expected by 1 January 2027. The Board noted the new legal and regulatory framework and the wider governance changes.

Investment Performance Report as at 31 December 2025

Jonathan Crowther presented the investment performance report for the quarter ending 31 December 2025. The fund's overall investment performance for the quarter was 2.6%, which underperformed the benchmark of 3.1%. Over the past year and three years, the fund also underperformed its benchmark, but it outperformed over the five and ten-year periods. The report noted an overweight position in equities by nearly 3%, with a slight underweight in bonds and diversifiers. The strategy moving forward involves rebalancing by selling some listed equities to favour bonds and reducing the overall allocation to equities in favour of bonds. Market conditions during the quarter were characterised by strong growth in equity markets, particularly in non-US markets and emerging markets, while bond markets saw a strong quarter towards the end due to relief over the budget and prospects of rate cuts. However, the market had changed dramatically by the start of Quarter 1 2026, with geopolitical events impacting oil prices and inflation expectations. The fund's market value had topped £7 billion but had since decreased by 3-5% due to market volatility. The Board discussed the importance of comparing performance against the discount rate set by actuaries, and it was agreed that future reports would include this metric, along with inflation performance, for better context.

The meeting also included opening announcements, thanks to outgoing board member Gail Johnson, and the deferral of the minutes from the previous meeting. The Board noted the dates of future meetings.