The London Borough of Lewisham Pension Fund is actively recalibrating its investment strategy and operational framework, presenting new opportunities and evolving priorities for asset managers. Recent government reforms, a maturing membership, and a focus on responsible investment are key drivers shaping the Fund’s future direction.
Pooling Power: London CIV to Absorb All Investment Implementation by 2026
A significant shift is underway as the Fund plans to transfer all investment implementation responsibilities to the London Collective Investment Vehicle (LCIV) by March 2026. This move is in line with government expectations for LGPS funds to pool assets, aiming for broader investment opportunities and enhanced cost efficiencies. Currently, 45% of the Fund’s assets are pooled, with the remaining to be transferred to LCIV. The Fund will also take principal investment advice from the pool. This transition is driven by the government’s ‘Pensions Investment Review Final Report 2025’, which emphasizes tackling fragmentation and unlocking investment potential through asset pooling. (2024/25 Annual Report, page 4, 5, 31)
ESG Integration: A Common Approach with Room for Divergence
The government has clarified that investment style decisions (active, index-tracking, etc.) will be made by pools as part of their implementation strategy. Pools are expected to work with Administering Authorities (AAs) to establish a common approach to ESG and Responsible Investment (RI) requirements. While the aim is for a unified approach to maximize benefits of scale, alternative options may be considered if there are divergent or conflicting stances between AAs within a pool. The government does not intend to proscribe a single solution but does not expect bespoke arrangements for each AA. This indicates a need for asset managers to align with LCIV’s evolving ESG framework while potentially offering flexibility for specific client needs. (2024/25 Annual Report, page 4, 32)
Beyond Fossil Fuels: Continued Commitment to Low-Carbon Mandates
The Fund continues its investment and drawdowns into low-carbon investments and low-carbon income-generating assets. Since 2018, the Fund’s equity portfolio has reduced its fossil fuel exposure by over 50% compared to the global benchmark. This has been achieved by reducing exposure to growth funds (equities) and reallocating to funds such as the Passive Equity Progressive Paris Aligned Fund (PEPPA) with the London Collective Investment Vehicle (LCIV) and into Storebrand Global Plus Fund. This strategy aligns with the Fund’s changed risk profile due to an improved funding position and its broader climate objectives. (2024/25 Annual Report, page 3, 6)
Nature-Based Solutions: A New Frontier for Investment
In the financial year 2024/25, the Fund made a new investment commitment of £94 million into the LCIV Nature Based Solutions Fund. This investment focuses on activities that improve and preserve the natural environment, further aligning the Fund’s investments with its climate objectives. As of September 2025 (at the time of writing the annual report), £52 million of this commitment had been invested. (2024/25 Annual Report, page 4, 6, 32)
Private Debt Expansion: Increasing Allocation to Income-Generating Assets
The Fund has increased its investment in private debt. As of September 2025, the Fund had invested £25 million of its £95 million commitment into the LCIV Private Debt II Fund. This move is part of the Fund’s strategy to diversify its portfolio and reduce heavy exposure to equity volatility by investing in income assets. (2024/25 Annual Report, page 25, 32)
Manager Performance Scrutiny: Quarterly Reviews and Strategic Adjustments
The Pensions Investment Committee (PIC) monitors the performance of all fund managers on a quarterly basis through reports from the Fund’s advisors. The Fund’s investment strategy has previously allocated a significant proportion to growth assets, but after the 2016 valuation, it adapted to seek a more diversified portfolio, reducing equity exposure by investing in income assets like infrastructure and private debt. The PIC assesses manager performance and will take steps if underperformance persists. (2024/25 Annual Report, page 25, 27)
New Manager Appointments and Mandates:
- LCIV Nature Based Solutions Fund: The Fund committed £94 million to this new fund in 2024/25, with £52 million invested as of September 2025. This investment is aimed at improving and preserving the natural environment. (2024/25 Annual Report, page 4, 6, 27, 32)
- LCIV Private Debt II Fund: The Fund committed £95 million to this new fund, with £25 million invested as of September 2025. This is part of a broader strategy to diversify into income-generating assets. (2024/25 Annual Report, page 27, 32)
- Storebrand Global Plus Fund: The Fund has moved its allocation to growth into this fund as part of its strategy to reduce fossil fuel exposure and align with low-carbon mandates. (2024/25 Annual Report, page 4)
- Passive Equity Progressive Paris Aligned Fund (PEPPA) with LCIV: The Fund has also moved its allocation to growth into this fund for similar reasons as the Storebrand Global Plus Fund. (2024/25 Annual Report, page 4)
Future Investment Strategy: Post-Valuation Reassessment
The results of the most recent triennial valuation, based on the Fund’s position at 31 March 2025, will be available by spring 2026. These results will be used by the PIC to reassess the funding strategy and the level of risk the Fund needs to take to meet its long-term obligations, guided by its agreed Responsible Investment Beliefs. From April 2026, the responsibility for the delivery of the investment strategy and specific investment choices will be for the LCIV. (2024/25 Annual Report, page 4)
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