Agenda item

The Investments Manager introduced the report to the Committee and highlighted the following points.

·  The changes to the Investment Strategy Statement (ISS) reflect the recommendations agreed by Committee at its 2025 investment strategy review workshop(s), namely:

o  Section 6 – SAA:

o  Formal 2% allocation to Natural Capital (within the current 32.5% allocation to illiquids)

o  Increase in Local Impact from 3% to 5% (within the current 32.5% allocation to illiquids)

o  Removal of the 6% allocation to Diversified Return Funds

o  Increase in the allocation to Index-linked Gilts from 12% to 14%

o  Increase in the allocation to Multi Asset Credit from 6% to 10%

·  With the exception of Natural Capital and Local Impact (strategies that will be developed under LPPI) all of the above strategy changes have been executed.

·  This ISS has been produced in line with the current 2016 regulations and will be updated to ensure compliance with the new 2026 pooling regulations when they are passed into law (expected 1st April 2026). For this reason, elements of the ISS still reflect legacy pooling arrangements.

·  The 2026 draft regulations stipulate that the new ISS should be published by 1st October 2026 and subject to consultation with scheme employers, members (unions) and other interested parties e.g. Mayoral Combined Authorities.

Edmund Cannon referred to section 6.1 (Strategic Asset Allocation) of the ISS and asked what the split of the 41.5% was between the three Listed Equity portfolios.

The Investments Manager replied that the 41.5% was split equally between passive and active and the active portion was split equally between the two active Brunel portfolios.

Edmund Cannon commented that he felt that the Liability Driven Investment Strategy (LDI) was vague and a potential risk to the Fund.

The Investments Manager replied that LDI was subject to ongoing review under new Pooling arrangements to ensure it continued to meet strategic objectives, adding that the Fund’s LDI strategy used leveraged index linked gilts to gain  exposure to the long end of the curve to capture an attractive real return, thereby reducing reliance on growth assets to meet the Fund’s required return.

The Chair added that the liabilities are related to gilt performance and that the strategy provides additional protection on big changes in liabilities, the like of which occurred in 2022 when the Conservative mini budget was announced.

Shona Jemphrey referred to the Responsible Investment exclusions and asked if the Fund could be more ambitious in its investment proposals.

The Investments Manager replied that these decisions had been agreed over a year ago collectively with the Brunel Partner funds, adding that the targets were required to strike a balance between being actionable and suitably ambitious. He added that the Fund produces an Annual Responsible Investment report which contains details of how the Fund is performing against its respective climate targets, commenting further that the Report had been published on the Fund website earlier in the week.

The Committee RESOLVED to:

i) Approve the draft 2026 Investment Strategy Statement

ii) Note that the 2026 ISS will be published on the Fund’s website and will be updated to reflect the latest regulations and any further strategy changes arising from the LPPI review before 1st October 2026.