Myners review final report issued just prior to budget with over fifty recommendations.
Close of two-month consultation period.
Separate statement on transaction costs. (A counter to commission controversy?)
Government response by HM Treasury published with particular reference to 10 principles.
Two-year assessment begins to test the extent of implementation using case studies and sampling by fund size.
The Myners report lolls somewhat lifeless. Skeletal principles have been found buried in reports to investment panels and committees on papers marked strictly confidential.
The cause of the seeming inert reporting state is yet to be determined, but there are several likely suspects including: choked by elongated timescales, publicity overkill, term abuse, done to death in the press. A clear case of exploiting the remains.
How To Solve The Mystery
At the beginning of the game different cards illustrate each principle and derived issues based on:
-- Effective decision making
-- Clear objectives
-- Focus on asset allocation
-- Expert advice
-- Explicit mandates
-- Appropriate benchmarks
-- Performance measurement
-- Regular reporting.
Some of these will be placed into a resurrection envelope. To enhance the game a rumble pack can be added to provide additional cards showing influential organisations based on:
-- HM Treasury
-- Financial Services Authority
-- National Association of Pension Funds
-- British Venture Capital Association
-- Fund Managers Association
To solve the mystery you must find out how to bring the Myners report to life. The cards contained in the resurrection envelope will reveal novel actions for your pension fund.
Setting The Scene
Shuffle all the cards. Take the top three cards and place them face down into the resurrection envelope. Deal the remaining cards to other players. Some may already have practised in a previous game and so will start with a slight advantage. Then, after checking your hand, you should immediately eliminate you own fund's conforming principles from the investigation. The game starts when a player assumes the lead by immediately proposing a bid for action.
HINT Do not let other pension funds see your hand. Keep your detective notebook covered throughout.
NOTE Any spare playing principles fall under suspicion and therefore can still be called for scrutiny at any time.
During the game you can prevail upon an organisation to assist in making your enquiries. Once you have the attention of an organisation make a 'suggestion' on
your turn. You can then question your fellow pension funds as, one by one, you ask them to reveal if they
have actioned a principle or supported suggestions
you have made.
Your turn ends when your assessment of a specific principle is bettered by another player and your card is then forfeited. But keep a note of your findings and carry on playing your remaining hand until all cards are spent and players will be eventually eliminated.
The game ends when the resurrection envelope is collected by the remaining and most deserving player. As a result of clever play and deduction you may use
the envelope contents to make a recommendation to
your councillors for the superior course of action. Will yours be the first fund to reveal the full answers to the mystery by 2003?
(1) Players are by invitation of HM Treasury. Invited players will enter the game by committing to having a go at the principles. Once your fund is in the game it cannot withdraw.
(2) Players accept there are some secret principles which have not yet been revealed. These are currently being established to surprise pension funds and their advisers in 2003.
(3) Players must engage laterally with the game. No two pension funds can develop the same approach.
(4) Playing officers called to different locations on the rubber may not be returned to their original venue. If you find your location has been changed to a place you do not want to visit you should automatically make a suggestion involving someone else on the next turn.
(5) You may make suggestions involving principles you do not hold to confuse other players.
(6) If it is discovered you accidentally failed to show a card in your hand you can no longer take part in the investigation. You must however remain in the game to answer suggestions. This is known as false witness.
How To Get Ahead Of
-- Early completion of the detective grid (below) will significantly improve your chance of winning
-- First assess the current performance against each principle/derived issue for your fund by assigning a number against each line - 1 (weak); 2 (OK); 3 (strong)
-- Total up your fund's assessed score and check against the potential top score
-- Use the results to identify areas for improvement
on your score. The game and players will assist with
-- Hold these in readiness pending the outcome of the current local government pension scheme review
-- Watch this space for an appraisal and interpretation of developments affecting the conduct of LGPS investment.
Head of finance and investment, London Pensions Fund Authority
EFFECTIVE DECISION MAKING
Decision makers require skill, information, resources 3
Trustees (1) (if electing to make decisions) must have sufficient expertise 3
Trustees (if electing to make decisions) must have appropriate training 3
Trustees to ensure sufficient in-house staff 3
Trustees should be paid 3
Good practice defined for the investment committee 3
Trustees should draw up a forward-looking business plan 3
Ensure the right structure and process is in place 3
SCORE FOR EFFECTIVE DECISION MAKING = 24
Trustees to set overall investment objective 3
Contributions received/receivable - to be well understood 3
Risk to be considered, especially underperformance risk 3
Peer group comparisons are not acceptable 3
SCORE FOR CLEAR OBJECTIVES = 12
FOCUS ON ASSET ALLOCATION
Strategic asset allocation to receive attention 3
Consider all asset classes, including private equity 3
SCORE FOR FOCUS ON ASSET ALLOCATION = 6
Separate contracts for actuarial and investment services 3
SCORE FOR EXPERT ADVICE = 3
Communicate to Members (2) objectives, benchmarks, risk 3
Communicate to Members managers approach to achieve objectives 3
No termination for under-performance before expiry evaluation timescale 3
Trustees knowledge of costs - transaction-related and commissions 3
No soft commission unless with good reason 3
SCORE FOR EXPLICIT MANDATES = 15
US Labor bulletin on activism in mandate (and trust deed (3)) 3
SCORE FOR ACTIVISM = 3
Explicitly consider (consult with managers(4)) appropriate indices 3
Limits on divergence from indices should reflect index selection 3
Consider active/passive management - efficiency, liquidity, costs 3
If active allow freedom to pursue genuine active strategies 3
SCORE FOR APPROPRIATE BENCHMARKS = 12
The Fund 3
Trustee procedures - performance to be assessed 3
Trustee decisions - performance to be assessed 3
Formal assessment delegated functions - advisers and managers 3
SCORE FOR PERFORMANCE MEASUREMENT = 12
TRANSPARENCY (strengthened SIP disclosures)
Who makes decisions 3
Fund investment characteristics 3
Planned asset allocation strategy and how derived 3
Mandates given to all advisers and managers 3
Nature of fee structures for all advisers and managers 3
SCORE FOR TRANSPARENCY = 15
Publish SIP 3
Results of monitoring advisers and managers 3
Send key information to members annually 3
SCORE FOR REGULAR REPORTING = 9
TOTAL SCORE FOR ALL PRINCIPLES = 111
(1) Trustee = sometimes Councillor substitutes
(2) Members = scheme participant
(3) Managers = investment manager
(4) Trust deed = not applicable, LGPS regs apply
0-30 Oh dear me. You never were much good with money were you.
31-55 Poor. Are you even aware you run a pension fund?
56-84 Excellent. A picture of pensions perfection?
85-111 Disaster. Prepare for a Treasury secondment soon.