Updating the myners principles
Trustees are also embracing more complex investment strategies.Lloyd Raynor, a consultant at Russell Investments, says that in response to widening deficits, some trustees have been moving towards liability hedging, alternatives and alpha-oriented approaches "These responses require enhanced decision-making and oversight resources, in terms of both expertise and time available.In particular, they must now take account of the strength of the scheme sponsor covenant and the risk that a sponsor might default.The principles also focus almost exclusively on one side of a pension fund's balance sheet - assets - and take little direct account of liabilities.The principles now represent a gold standard of governance.Yet the principles reflect the times in which they were drafted. Trustees must now take account of the risks attaching to their scheme.
The NAPF also noted that trusteeship had become more complex as a result of a harsher financial environment and more regulation."We feel it would be helpful to see pension funds being run more like companies to help fill any governance gap.The efficient management of companies requires executives to be fully empowered by the non-executive oversight function, and we believe parallels apply to the management of pension funds."Jonathan Berman, partner and head of the investment unit at the law firm Sackers, argues that updating the Myners, principles will be ineffective if it is not backed by investment in decision-making and governance.Funds run the risk of implementing more complicated fund structures while not enhancing their governance structures adequately, creating a ‘governance gap'." Raynor says the updated Myners principles should encourage funds to match their governance structures to their investment approaches."At present there is a risk funds are trying to do too much with the governance arrangements they have in place." He also suggests that there is a need for more professionalism.