TABLE 1
FROM:
Best-practice pension fund governance
Gordon L Clark and Roger Urwin
BACK TO ARTICLETable 1. Best-practice factors
| 1. Mission clarity | Clarity of the mission and the commitment of stakeholders to the mission |
| 2. Investment executive | The use of a highly investment-competent investment function tasked with clearly specified responsibilities, with clear accountabilities to the investment committee |
| 3. Effective time budget | Resourcing each element in the investment process with an appropriate budget considering impact and required capabilities |
| 4. Required competencies | Selection to the board and senior staff guided by: numeric skills, capacity for logical thinking, ability to think about risk in the probability domain |
| 5. Leadership | Leadership, being evident at the board, investment committee and executive level, with the key role being the investment committee Chairman |
| 6. Effective compensation | Effective compensation practices used to build bench strength and align actions to the mission, different strategies working according to fund context |
| 7. Strong beliefs | Strong investment philosophy and beliefs commanding fund-wide support that aligns with operational goals and informs all investment decision-making |
| 8. Competitive positioning | Frames the investment philosophy and process by reference to the institution's comparative advantages and disadvantages |
| 9. Risk budget | Frames the investment process by reference to a risk budget aligned to goals and incorporates an accurate view of alpha and beta |
| 10. Real-time decisions | Utilises decision-making systems that function in real time not calendar time |
| 11. Manager line-up process | The effective use of external managers, governed by clear mandates, aligned to goals, selected with rigorous application of fit for purpose criteria |
| 12. Learning organisation | Work to a learning culture which deliberately encourages change and challenges the commonplace assumptions of the industry |