1 / 11

ENS Breakfast Presentation

ENS Breakfast Presentation. Speaker: Jonathan Mort Company: Jonathan Mort Incorporated, Cape Town Topic: Best Governance Practice of Retirement Fund Investments Date: February 2011. Purposes of good governance. Ensure the promised benefits are delivered.

Download Presentation

ENS Breakfast Presentation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. ENS Breakfast Presentation Speaker: Jonathan Mort Company: Jonathan Mort Incorporated, Cape Town Topic: Best Governance Practice of Retirement Fund Investments Date: February 2011

  2. Purposes of good governance • Ensure the promised benefits are delivered. • Ensure the benefits are optimal within the constraint of appropriate risk. • Costs of delivery of benefits are transparent and defensible. • Process of delivery of benefits can be trusted by stakeholders.

  3. PF 130 requirements • Each fund must have an investment policy statement - • communicated to stakeholders • reviewed annually to ensure appropriate for members and needs of the • fund.

  4. PF 130 requirements (cont) • IPS must contain - • who the fund’s investment advisers are • custodian • if the fund has SRI policy, and definition • whether fund investments are in the form of insurance policy or • segregated mandate • fund benchmarks • level of risk attributed to each asset class • whether fund exercises active ownership rights.

  5. PF 130 requirements (cont) • Member investment choice. The board is responsible for appropriateness of portfolios, especially default. • Fund may not abuse balance of cost obligation. • Direct contractual relationship between fund and custodian.

  6. Draft Regulation 28 • Principles based, premised on - • responsible investment approach to earn adequate risk adjusted returns for • member profile, fund liquidity needs and liabilities • emphasis on sustainability and environmental, social and governance • (ESG) factors. • Every fund must have investment policy statement.

  7. Draft Regulation 28 (cont) • Investment principles (for a fund, its advisors and trustees) - • must comply with the spirit of Reg 28 • promote the education of trustees • consider BEE empowerment for service providers • ensure that the fund assets are appropriate for liabilities • before making an investment, and while invested – • do due diligence of investment risks (may use rating agencies, but not • in isolation) • consider sustainable long term issues of the investment, including • ESG factors. • These principles must be addressed in IPS.

  8. Fund contractual arrangements • Board is not expected to have all the skills to administer the fund, and may obtain expert advice. • Especially important in relation to investment, actuarial and legal issues. • Very important that - • board understands fund’s investment objectives, and communicates these • clearly to stakeholders • these investment objectives are aligned with the governance purposes • (especially optimal benefits and defensible costs).

  9. Fund contractual arrangements • Typically most funds simply outsource the investment responsibility. This means investment mandates are on the terms proposed by the asset manager :- • often not aligned with IPS • rarely reviewed by legal adviser • usually not aligned in terms of reporting periods • inadequate use of custodian (eg. reporting on what investments are held, how active ownership policy exercised) • no thought given as to the disadvantages of an investment policy over segregated mandate (no active ownership, counter-party risk, etc).

  10. Risk management • Biggest risks in relation to a fund are usually investment risks. • Usually only investment risks considered are market risks, without regard for counter-party or contractual risks. • How responsible are boards in relation to fund investments? • importance of active ownership rights • negative screening of investments • contribution to macro economic stability • responsible investment manager choice and BEE imperatives.

  11. Thank You.

More Related