Trends and Regulations in Pension Fund Investments: International Perspectives
The International Pension Funds Conference held on March 15, 2001, in Santiago, provided insights into the trends and regulations shaping pension fund investments. Key topics discussed included investment practices, restrictions, portfolio breakdown, and the impact of the evolving EU regulatory landscape. A significant focus was placed on corporate governance, highlighting the growth of institutional ownership, OECD principles, and the rise of shareholder activism. Additionally, the role of social responsible investments was explored, emphasizing the future direction of pension fund management.
Trends and Regulations in Pension Fund Investments: International Perspectives
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Presentation Transcript
II International Pension Funds Conference PENSION FUNDS INVESTMENTS: Trends, Regulations and Corporate Governance Santiago, 15 March 2001 inverco
2/13 A. INVESTMENT PRACTICES • Restrictions • Portfolio breakdown • Different speeds • Directive proposal B. CORPORATE GOVERNANCE • Growth of institutional ownership • OECD principles • Shareholder activism • Social Responsible Investments inverco
3/13 A. INVESTMENT PRACTICES • Restrictions inverco
4/13 A. INVESTMENT PRACTICES • Portfolio breakdown (%) Source: William Mercer (data 2000) • Prudent man rule vs. Restrictions • Introduction of EURO inverco
5/13 A. INVESTMENT PRACTICES • Different speeds Sources: European Commission, William Mercer inverco
6/13 A. INVESTMENT PRACTICES • Directive proposal (I) • Invest in a “prudent manner” • DC Schemes: • ensure security, quality, liquidity • proper diversification • sponsoring undertaking ( <5% ) • Assets to cover technical provisions • nature and duration of benefits • proper diversification • sponsoring undertaking ( <5% ) inverco
7/13 A. INVESTMENT PRACTICES • Directive proposal (& II) • States: not require particular categories of assets • States: not prior approval or notification requirem. • Investment possibilities: • Traded shares or corporate bonds: • assets covering technical provisions: up to 70% • DC schemes: 100% • Non-matching currencies: at least 30% • Risk capital markets • States: more stringent rules (prudential reasons) inverco
8/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (I) • 1981: 3,2 BILLION US DOLLARS • 1991: 15,6 BILLION US DOLLARS • 1998: 30,3 BILLION US DOLLARS AVERAGE ANNUAL GROWTH RATE (1990-1998) Source: OECD Institutional Investors 2000 inverco
9/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (II) INSTITUTIONAL INVESTORS:DISTRIBUTION Insurance Companies 36% Pension Funds 32% Pension Funds 28% Insurance Companies 27% 19% Investment Funds 30% Investment Funds 17% Others 11% Others 1.990 1.998 Source: OECD inverco
10/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (&III) 1998: FINANCIAL ASSETS (% GPD) 3.516 inverco
11/13 B. CORPORATE GOVERNANCE • OECD principles • Right of shareholders • Equitable treatment of shareholders • Role of stakeholders • Disclosure and transparency • Responsabilities of the Board inverco
12/13 B. CORPORATE GOVERNANCE • Shareholder activism • Iniciatives: • Calpers • TIAA-CREF • Hermes • Commitments to exercise fiduciary responsa- bilities (voting): • US: ERISA • UK: NAPF • European iniciatives: • Cadbury and Greenbury Codes • Others: Viennot, Olivencia • Deminor inverco
13/13 B. CORPORATE GOVERNANCE • Social Responsible Investments • Indexes: Domini • Consultants: EIRIS • UK Disclosure obligation inverco
II International Pension Funds Conference PENSION FUNDS INVESTMENTS: Trends, Regulations and Corporate Governance Santiago, 15 March 2001 inverco
