The Sutton Pension Fund experienced a challenging quarter ending March 31, 2026, with its value decreasing by £25 million and underperforming its benchmark. Katherine Gray, Head of Pensions Investments and Treasury, informed the Pension Board on Thursday, July 16, 2026, that the underperformance was significantly influenced by geopolitical uncertainty related to the Iran conflict, which triggered the worst quarterly performance for U.S. equities since 2022. The escalation of the war also led to a sharp spike in energy prices, increasing inflation expectations and fears of further economic repercussions.

Bar chart showing total return percentages for various investment categories, with Energy showing the highest return at 82.8%.
Total Return by Investment Category

Specific fund underperformances were also detailed. The LCIV Global Equity Fund (managed by Newton) returned -6.1% against a benchmark of -1.2%, primarily due to a lack of exposure to energy stocks and weak stock selection in consumer staples and healthcare. The LCIV Sustainable Equity Fund (managed by RBC) returned -4.0% against a benchmark of -1.6%, with its low exposure to energy during a period of surging oil prices detracting from its performance. The LCIV Multi-Asset Credit Fund (managed by CQS/Pimco) returned -1.2% against a benchmark of +0.9%, impacted by concerns over inflation and growth reignited by conflict in the Middle East.

Bar chart showing the three-month performance of various investment asset classes for Sterling and Local Currency returns up to March 31, 2026.
Three Month Performance to 31 March 2026

In response to these performance challenges, the London Collective Investment Vehicle (LCIV) is undertaking a review to streamline its product offerings, aiming to improve the equity sleeve and deliver long-term risk-adjusted returns. Specific products targeted for streamlining were not detailed.

Despite the quarterly downturn, a verbal update indicated a positive trend by the end of June 2026, with assets increasing by approximately £17 million. This recovery has provided some reassurance regarding the fund's performance.

The fund's asset allocation shows Listed Equity currently exceeding its strategic target by 11.3%. This overweight position is a consequence of the decision to hold the 5% allocation to Private Equity within Listed Equities, pending the establishment of a dedicated private equity product.

Bar chart showing the performance of different asset classes, with Listed Equity showing the highest positive return and Private Equity showing a negative return.
Asset Class Performance

The fund's overall funding level as of March 31, 2026, stood at 105%, a decrease from 114% following the 2025 triennial valuation. This reduction is largely attributed to higher-than-anticipated inflation over 2026, which has increased the value of the fund's liabilities due to greater expected increases in Local Government Pension Scheme (LGPS) benefits. A specific projected inflation rate was not provided.

For further details, refer to the Public reports pack presented to the Pension Board on July 16, 2026.