Environment Agency Active Pension Fund · United Kingdom · £5.1B
The Environment Agency fund stopped trying to win
This fund reached a 143% funding level at its 2025 valuation, and then spent part of the win. Across eight weeks in mid-2025 it moved £707.5 million, about 14% of the fund, out of global equities and corporate bonds into liability-matching assets, taking that target from 12% to 25%. It has also trailed its own benchmark on every horizon for several years. Neither of those is the number it is graded on.
Key numbers, and what they mean
143%
Its funding level at the 2025 valuation, up from 103% in 2022. Once the obligation is covered, more expected return buys less than certainty does.
£707.5M
Moved out of global equities and corporate bonds into liability-matching assets across three phases in June and July 2025, about 14% of the fund. De-risking was a transaction with a date and a size, not a drift.
12% to 25%
The change in its target for liability-matching assets in a single year. Its global equity target fell from 34% to 27% and corporate bonds from 19% to 13%.
5.4%
The return its actuary says it needs. The fund returned 6.5% in the year to March 2026 and missed its benchmark by 2.9 points. Only one of those two numbers is the objective.
Strategic allocation, March 2026
Global equity27%
Liability driven investment25%
Corporate bonds13%
Infrastructure9%
Multi-asset credit8%
Private debt and private equity9%
Real assets, sustainable finance and cash9%
The fund classifies this as 51% return-seeking and 49% risk-reducing. A year earlier the equity target was 34% and liability-driven investment was 12%.
The read-through
From the report
Takeaway: how to apply it to a portfolio
Its target for liability-matching assets went from 12% to 25% and the holding from £561 million to £1.27 billion, funded by selling £707.5 million of equities and corporate bonds in three phases across June and July 2025.
De-risking is a transaction with a date and a price, not a gradual drift. Write down now what funding level makes you sell and how much, or you will keep the risk until something else forces you to sell it at a worse moment.
Its stated aim is a return at least in line with the actuary's assumption, currently 5.4% a year. It returned 6.5% in the year to March 2026 and trailed its benchmark by 2.9 points.
Pick one number to be graded on, and make it the one tied to the obligation. Holding two scorecards at once is how a portfolio that has correctly removed risk gets talked back into it.
The funding level was 143% at the March 2025 valuation and about 134% a year later, even though the assets returned 6.5% over that year.
A surplus measured against a discount rate is not money in the bank. It moved nine points against this fund in a year when its assets rose. That gap is the whole argument for a hedge: you are not buying return, you are buying the right to stop caring which way rates go next.
The Argus lensClose to a fifth of this fund sits in private debt, private equity, infrastructure and real assets, and its own report names real assets and sustainable finance as the biggest drag on the year. Whether a private fund is doing the job you hired it for shows up in the documents long before it shows up in a return. That read is ours.
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About the source
The fund's annual report and financial statements for 2025-26 give the £5.1 billion value, the returns against its strategic benchmark, the funding position and the description of the £707.5 million disinvestment. The allocation targets and the stated return objective come from its investment strategy statement agreed in March 2026. The 143% funding level is from the 31 March 2025 triennial valuation; the later figure is a roll-forward rather than a formal valuation.