Pension funds' investments are increasingly made by committee
December 20, 2013
A significant proportion of decisions about pension funds' investments are increasingly being prepared by specially appointed investment committees. These committees include managers and advisers with various roles. The committees are playing an increasingly important role in the running of a pension fund. This is revealed in the book 'Beleggingscommissies' ['Investment Committees'] by Prof. Alfred Slager of TIAS. Slager has written the book in collaboration with pension provider PGGM.
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The number of funds that have established or expanded a pension committee has grown substantially. Of the sixty Dutch funds examined, 47 had an investment committee in 2011, whilst only 32 funds had an investment committee in 2001. The average size of the committees has increased slightly from five to six members. Some funds have created committees with more than a dozen members. The number of advisers or external members is also growing steadily, from an average of one in 2001 to two or three in 2011.
Investment ensures that pensions can be paid
Pension fund managers in the Netherlands are investing over 1000 billion euro for the purpose of pension accrual. These investments are needed in order to ensure that pensions can be paid in the future. Pension funds are establishing committees for this which consider important investment decisions.
Research into those investment committees is important. The role of the investment committee is sometimes unclear, and varies between pension funds. As a result, it is not entirely clear what you can expect of a committee. The role of external advisers is also not always clearly defined. The effectiveness of the decision-making process is thereby important. These questions need to be settled in advance if an investment committee is to perform well. It is thereby not possible to draw on research, since little has been published. Hence this book about investment committees.
Useful addition to the knowledge about pension fund governance
"The current studies do not provide a conclusive answer to the question of whether the current approach to management using investment committees is good for the development and effectiveness of pension funds and the question of what managers can learn from one another," says Slager. "This book is a useful addition to the knowledge about pension fund governance, with the aim of creating improved transparency in reporting, better accountability to the board and a strengthening of the stakeholders' participation and protection."
The aim of Slager's research was to gain insight into the size, composition and development of investment committees. Sixty funds were selected for this. Slager also conducted interviews at eleven funds, which have been used as case studies in the book. It's not that the committees are a 'black box' or that the decisions are made in back rooms. However, the knowledge has never previously been gathered together.
Beleggingsbeleid, besluitvorming en de rol van beleggingscommissies bij pensioenfondsen
Athor: Alfred Slager
Series: Eburon Business