The Hammersmith and Fulham Pension Fund saw its market value grow to £1.491 billion in the quarter ending December 31, 2025, an increase of £9 million. However, the fund's investment performance for the quarter fell short of its benchmark by 2.16%, achieving an absolute return of 1.15%.

Over the entire year ending December 31, 2025, the fund delivered a positive return of 5.71% after fees. Despite this, it underperformed its fixed-weighted benchmark by 4.1% for the year and by 3.1% per annum over the three-year period ending December 31, 2025. This consistent underperformance over the past twelve quarters has been primarily driven by the LCIV Global Equity Quality Fund, managed by Morgan Stanley, and to a lesser extent by Darwin Alternatives and Man Group.

Asset Allocation Pie Chart
Pie chart illustrating the asset allocation of the Pension Fund.

The Pension Fund Committee received a quarterly update on December 31, 2025, detailing the fund's performance, cashflow, and risk assessment. The report highlighted that the LCIV Global Equity Quality Fund's underperformance was significant, delivering a negative absolute return of -1.6% and underperforming its benchmark by 5.0% for the quarter. This was attributed to the fund's structural orientation of the quality portfolio, further exacerbated by poor stock selection. Specifically, cyclical industries outperformed companies with more stable, sustainable cashflows, and stock selection within the technology sector (e.g. RELX Plc) contributed negatively to absolute returns. The report also noted a failure in the healthcare sector, where a quality-focused manager would be expected to add value.

Further underperformance over the year was also linked to the LCIV Global Equity Quality Fund, which materially underperformed its MSCI ACWI benchmark since inception into the Fund's investment portfolio, with poor stock selection in technology and healthcare sectors being key drivers. Darwin Alternatives' Leisure Development Fund contributed negatively with a return of -21.3% over the year, underperforming its target by 31.7% due to a write down of the Darwin Leisure Property Fund and lower rental revenues. Man Group's Affordable Housing fund's performance over the year was not explicitly detailed against a benchmark, but its contribution to the overall underperformance was noted.

The committee had previously agreed to disinvest from the LCIV Global Equity Quality Fund in favour of BlackRock's ESG-inclined passive equity fund. This transition, agreed on November 25, 2025, involves reinvestment into the BlackRock ACS World ESG Screened and Optimised Equity Tracker Fund (GBP Hedged). The process is currently paused, awaiting confirmation from the final investor regarding their intention to exit the mandate, as LCIV is planning to close the fund and coordinate a unified exit strategy with other remaining investors.

Value at Risk Breakdown Chart
A waterfall chart illustrating the breakdown of Value at Risk (VaR) for the current asset allocation of the Pension Fund.

In more positive news, the triennial actuarial valuation for the fund showed an improved funding level of 113% as of March 2025, a significant increase from 105% in 2022, largely attributed to strong investment returns. This has resulted in a reduced primary contribution rate for the council, from 20.7% to 19.4%. This improved funding level and reduced contribution rate are expected to lead to better financial performance in the long run for the Council and the council tax payer. The reduced employer contributions will increase the responsibility of the investment portfolio to meet cashflow requirements. The Investment Strategy Review paper notes that the improved funding level reflects strong investment performance and higher forward-looking return expectations, and that reducing risk would reflect a more prudent approach, while maintaining or increasing risk could support further funding improvements.

The report Pension Fund Quarterly Update Q4 2025 [https://democracy.lbhf.gov.uk/documents/s134278/Item%206%20-%20Quarterly%20Update%20Cover.pdf] further details that the fund has underperformed its fixed weight benchmark over ten of the last twelve quarters to the end of December 2025.

For more detailed information on the fund's performance and strategy, refer to the Key Performance Indicators Paper [https://democracy.lbhf.gov.uk/documents/s134291/Key%20Performance%20Indicators%20Paper%20PFC%200326.pdf] and the Investment Strategy Review [https://democracy.lbhf.gov.uk/documents/s134273/Item%203%20Investment%20Strategy%20Review.pdf].