Pensions - Articles - Trustees responsibilities under fiduciary management

We've recently read comments about the Dutch parliament adopting an amendment that could make it illegal for pension schemes to outsource the design and monitoring of their strategic investment policies to fiduciary managers. The Netherlands is where fiduciary management first took hold and generated significant scale, so we should pay close attention to this.

 By Mark Baker, Head of Fiduciary Oversight at Hymans Robertson

 It is also worth noting that the Dutch minister for social affairs was against the amendment because he said it was unnecessary – existing legislation already says that schemes are not allowed to outsource supervision of their investment policy. We have always said that the trustees retain responsibility for all that is done in their name. While it is fine to delegate asset management to experts – indeed it is a requirement in law that trustees do so – this makes it very clear that trustees cannot abdicate responsibility by handing over the keys and forgetting about it.

 So investment strategy remains the key issue the trustees should be dealing with, as the Myners review said over 15 years ago. The trustees cannot get rid of that responsibility and delegating it to another party is simply not the right answer. Trustees must be up to speed with strategy and take proper independent advice on it. The design of the investment strategy (or policy) should not be delegated to the implementer of the strategy i.e. the asset manager (or fiduciary).

 In addition, it is simply good governance for trustees to ask an independent party to oversee the activities of all their asset managers, including any fiduciary component. Fiduciary oversight is not a “nice to have” but an essential component where fiduciary management is employed. It is entirely appropriate that trustees should oversee the activities of all their asset managers (including fiduciaries) to independently assess whether or not they are doing a good job. The case for fiduciary oversight was well made long before the involvement of the CMA, but their initial findings seem to underline this as good governance. 

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