NEW MYNERS POLICY
Myners Updated Investment Principles – Compliance Statement
Updated Myners Principles were published in October 2008, and the private
sector are currently operating to those principles. However, these updated
principles will not apply to the LGPS until new regulations, which the CLG are
drafting, come into force. Regulations are expected any time now followed by
The SIP including the Myners Compliance Statement has to be attached to, or
source referenced, in Pension Fund Report and Accounts. Administering
authorities are still required to publish performance against the Myners Principles
that ceased to exist in October, until release of regulations to change this. The
CLG does not see a problem with this but has suggested that authorities also
publish performance against the new principles as an appendix.
The new principles are less prescriptive and an industry led framework for the
application of the principles will be the accepted code of best practice throughout
the industry in investment decision-making and governance. It is expected that
trustee boards will report against these on a voluntary ‘comply or explain’ basis.
‘Best Practice Guidance’ is intended to help trustees to apply the principles
effectively. Trustees are not expected to implement every element of best
practice. Rather trustees may use best practice examples where appropriate to
help demonstrate whether compliance has been achieved.
Principle 1: Effective decision-making (Current Principles 1 and 4)
Trustees should ensure that decisions are taken by persons or organisations with
the skills, knowledge, advice and resources necessary to take them effectively
and monitor their implementation.
Trustees should have sufficient expertise to be able to evaluate and challenge
the advice their receive, and manage conflicts of interest. Best Principle Guidance
• The board has appropriate skills for, and is run in a way that facilitates,
• There are sufficient internal resources and access to external resources
for trustees and boards to make effective decisions.
• It is good practice to have an investment sub-committee, to provide the appropriate focus and skills on investment decision-making.
• There is an investment business plan and progress is regularly
• Consider remuneration of trustees.
• Pay particular attention to managing and contracting with external
advisers (including advice on strategic asset allocation, investment management
and actuarial issues).
? Full compliance. The fund has a dedicated Pensions Panel that is
supported by suitably experienced officers and an independent
adviser. All members of the Panel are offered training on appropriate
topics at each of the Pension Fund Panel meetings. A Workplan is
prepared annually which includes a timetabled programme of reviews
and planned procurement exercises. Separate arrangements are in
place for actuarial services and investment advice.
The Funding Strategy Statement also serves as an investment risk
business plan, and highlights useful triggers to ensure that risk
mitigation measures are taken at the appropriate time.
Principle 2: Clear objectives (Current Principles 2, 5 and 7) Principle
Trustees should set out an overall investment objective(s) for the fund that takes
account of the scheme’s liabilities, the strength of the sponsor covenant and the
attitude to risk of both the trustees and the sponsor, and clearly communicate
these to advisers and investment managers. Best Practice Guidance
• Benchmarks and objectives are in place for the funding and investment
of the scheme.
• Fund managers have clear written mandates covering scheme
expectations, which include clear time horizons for performance measurement
• Trustees consider as appropriate, given the size of fund, a range of asset
classes, active or passive management styles and the impact of investment
management costs when formulating objectives and mandates.
• Consider the strength of the sponsor covenant.
? Full compliance. The Fund’s objectives are set out in the Statement of
Investment Principles. Fund managers operate to detailed written
mandates that give clear investment objectives and timescales for
measurement (rolling three years) set out in their Investment
Management Agreement. A number of benchmark idices have been set
for each asset class. Control ranges are in place consistent with
performance targets to which the fund managers should work.
The fund has three specialist mandates. The fund considered the full
range of asset classes when setting its strategic asset allocation in
2003. In doing so, it had regard to its objective of moving from a
funding level of 68% in 2004 to 100% by 31st March 2024. Alternative
asset classes are reviewed from time to time and researched as
Management styles and the impact of investment management costs
are considered at the time of the regular procurement exercises.
The Pension Fund Panel take comfort from the constitutional
permanence of the Council and the strength of the employer covenant
is not an issue.
Reviews are carried out of the strength of the admitted body employers
from time to time.
Principle 3: Risk and liabilities (Current Principle 3) Principle
In setting and reviewing their investment strategy, trustees should take account
of the form and structure of liabilities.
These include the strength of the sponsor covenant, the risk of sponsor default
and longevity risk.
Best Practice Guidance
• Trustees have a clear policy on willingness to accept underperformance
due to market conditions.
• Trustees take into account the risks associated with their liabilities’
valuation and management.
• Trustees analyse factors affecting long-term performance and receive advice on how these impact on the scheme and its liabilities.
• Trustees have a legal requirement to establish and operate internal
• Trustees consider whether the investment strategy is consistent with the
scheme sponsor’s objectives and ability to pay.
? Full compliance. Asset allocation forms part of the customised
benchmark proposed by the fund’s actuary following an asset/liability
study and consulted on by the fund’s adviser and managers and
recommended to the Panel. Fund managers have discretion to position
the fund around the customised benchmark within agreed ranges set by
the actuary consistent with the performance objectives of the fund.
Whilst the fund’s aspiration is that both balanced managers will out-
perform the customised benchmark at all times, if investors buy into
these philosophies, they have to make allowances for the firms to have
periods of underperformance, while delivering good performance over
the long term.
Not applicable. The Council has a designated Pension Fund Panel.
Principle 4: Performance assessment (Current Principle 8) Principle
Trustees should arrange for the formal measurement of the performance of the
investments. investment managers and advisers. Trustees should also periodically make a formal policy assessment of their own effectiveness as a decision-making body and report on this to scheme members.
Best Practice Guidance
• There is a formal policy and process for assessing individual
performance of trustees and managers.
• Trustees can demonstrate an effective contribution and commitment to
the role (for example measured by participation at meetings).
• The chairman addresses the results of the performance evaluation.
• State how performance evaluations have been conducted.
• When selecting external advisers take into account relevant factors,
including past performance and price.
? Mostly Comply. The Panel review the suitability of the investment
strategy on a regular basis, typically around the triennial Actuarial
Valuation. Performance of the fund and fund managers is monitored
quarterly with a more extensive annual review each in September.
Monitoring of past performance and price of all external service
providers and advisers is undertaken as part of the regular
The Council has commissioned the WM Company to carry out
independent performance management evaluation of Fund Manager
Performance against the Ealing benchmark and against the
performance of the WM Universe which consists of some 87 Funds
within the LGPS universe.
Principle 5: Responsible ownership (Current Principle 6)
Trustees should adopt, or ensure their investment managers adopt, the
Institutional Shareholders’ Committee Statement of Principles on the
responsibilities of shareholders and agents. A statement of the scheme’s policy on responsible ownership should be included
in the Statement of Investment Principles. Trustees should report periodically to members on the discharge of such
Best Practice Guidance
• Policies regarding responsible ownership are disclosed to scheme
members in the annual report and accounts or in the Statement of Investment
• Trustees consider the potential for engagement to add value when
formulating investment strategy and selecting investment managers.
• Trustees ensure that investment managers have an explicit strategy,
setting out the circumstances in which they will intervene in a company.
• Trustees ensure that investment consultants adopt the ISC’s Statement
of Practice relating to consultants.
? Full compliance. The Panel has adopted the fund managers’
standard policies on activism and each has adopted the
Institutional Shareholders’ Committee Statement of Principles. All
managers adopt a policy of engagement and constructive dialogue
with companies. Policies regarding responsible ownership are
disclosed to scheme members in the Statement of Investment
Principles and the Annual Report.
Trustees review the Exercise of voting rights are quarterly
Principle 6: Transparency and reporting (Current Principles 9 and 10) Principle:
Trustees should act in a transparent manner, communicating with
stakeholders on issues relating to their management of investment, its
governance and risks, including performance against stated objectives. Trustees should provide regular communication to members in the form they
consider most appropriate.
Best Practice Guidance:
• Reporting ensures that the scheme operates transparently and
enhances accountability to scheme members and best practice provides a basis for the continuing improvement of governance standards.
? Full compliance. Details of the Pensions Panel’s communications
policy is published on the Council’s internet site, together with the
actuarial valuation, annual report of the fund, funding strategy
statement, governance compliance statement, governance policy
statement, statement of investment principles and Myners
A summary of the annual report is sent to all members of the fund.