By Kim Miller,2014-04-05 01:48
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A statement of the scheme's policy on responsible ownership should be included in the Statement of Investment Principles.



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

    CIPFA guidance.

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,

    effective decision-making.

     • 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

    and evaluation.

     • 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

    procurement exercises.

    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

    compliance statement.

    A summary of the annual report is sent to all members of the fund.

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