LPF Investment strategies

Most employer liabilities are funded under the Main Strategy, which adopts a long-term investment strategy, aiming to generate an investment return that will minimise the cost to the employer within reasonable and considered risk parameters. The Main Strategy maintains significant exposure to assets such as equities and infrastructure, which have a history of protecting and growing purchasing power.

A small number of employers are funded in the Mature Employer Strategy, which invests in a portfolio of UK index-linked gilts to reduce funding level and contribution rate risk as they approach exit from the Fund. The liabilities funded by the Mature Employer Strategy represent approximately 0.1% of total assets.

The Fund's last triennial valuation was dated 31 March 2023, at which point the actuary estimated Lothian Pension Fund's funding level to be 157%.

Investments 

The 50/50 Strategy enables another small group of less mature employers to fund liabilities with a 50/50 mix of the Main Strategy and the Mature Employer Strategy. The liabilities funded by the 50/50 strategy represent a further 0.3% of total assets. 

The Buses Strategy, which was created when the assets and liabilities of Lothian Buses Pension Fund were consolidated into the Lothian Pension Fund on 31 January 2019, is now a 50/50 mix of the Main Strategy and the Mature Employer Strategy following the recent strategy review (having been 55/45 previously). At 31 March 2025, the Buses strategy represented approximately 4.8% of total assets.

Lothian Pension Fund Actual Asset Allocation (%) at end March 2025 

53.1%  Equities 
22.3%  Real Assets 
  3.2%  Credit  
18.2%  Sovereigns 
  3.3%  Cash 

The investment objective of the Fund is to achieve a return sufficient to meet the funding objectives over the long term as outlined in the Funding Strategy Statement. The Fund aims to generate adequate returns to pay promised pensions and to make the scheme affordable to employers now and in the future, while minimising the risk of having to increase contribution rates in the future.

This aim is translated into a strategic benchmark comprising a mix of assets, whose future returns are expected to approximate the required returns over the long term. The Fund isn’t expected to track the benchmark from year to year, but it does target a return broadly in line with its strategic benchmark allocation over the long term, with a lower-than-benchmark level of risk.

Fund returns may deviate from benchmark returns, particularly over shorter timeframes. There are two main reasons why this may occur: most underlying portfolios aren't constructed to track listed market benchmarks, and private market benchmarks may not be well suited to short-term comparisons against the relevant private market assets.

The Fund’s performance over the last year and over longer-term timeframes is presented in the table above, both relative to the asset benchmark and with other relevant economic metrics. UK CPI and Average Weekly Earnings are both measures of inflation and fund liabilities are linked to inflation. Both had grown at low and relatively stable rates for many years until more recently.

View the manager mandates at 31 March 2025 within the Annual Report 2025