Public pension fund management : governance, accountability, and investment policies : proceedings of the second Public Pension Fund Management Conference, May 2003 / edited by Alberto R. Musalem, Robert J. Palacios.

Format:

Book

Conference/Event

Government document

Contributor:

Musalem, Alberto R., 1940-

Palacios, Robert J.

World Bank.

Conference Name:

Public Pension Fund Management Conference (2nd : 2003 : Washington, D.C.)

Language:

English

Subjects (All):

Pension trusts--Cross-cultural studies--Congresses.

Pension trusts.

Pension trusts--Management--Cross-cultural studies--Congresses.

Pension trusts--Management.

Genre:

Cross-cultural studies.

Conference papers and proceedings.

Physical Description:

xxviii, 287 pages : illustrations ; 24 cm

Place of Publication:

Washington, D.C. : World Bank, [2004]

Contents:

Chapter 1 A Framework for Public Pension Fund Management / Jeffrey Carmichael, Robert Palacios 1

The Growth of Public Sector Pension Funds 2

Governance of Public Pension Schemes 6

Public Sector Governance: General Issues 7

Laying a Foundation for Public Pension Scheme Governance 8

A Governance Checklist 16

Accountability of Public Sector Pension Schemes 17

Laying a Foundation for Public Pension Scheme Accountability 17

An Accountability Checklist 22

Investment Policies 22

Laying a Foundation for Public Pension Scheme Investment Policy and Processes 24

An Investment Policy Checklist 30

Annex 1.A ABP Investment Policy Statement 34

I. The Investment process 35

II. Investment plans 36

III. Implementation of the investment plan 37

IV. Social responsibility 37

V. The role of the shareholder ("corporate governance") 38

VI. Amendment of this Code 40

Annex 1.B Index of Governance Framework Document

Australian Prudential Regulation Authority (APRA) 41

2. Key Roles and Relationships 41

3. Internal Accountability Framework 41

4. External Accountability Framework 41

5. Consequences of Failure to Meet Responsibilities 42

Appendix A Statutory Responsibilities of Board Members 42

Appendix B Matrix of Delegations 42

Chapter 2 Governance of Public Pension Funds:Lessons from Corporate Governance and International Evidence / David Hess, Gregorio Impavido 49

Agency Theory and Corporate Governance 50

Agency Problems: Separation of Ownership and Control and Moral Hazard Problems 50

Resolving Problems 52

Agency Problems in Public Pension Plans 57

Who Are Public Pension Fund Stakeholders? 58

Potential Agency Problems 59

Political Involvement: Government Restrictions and Social Mandates 61

The Effects on Fund Performance 65

Solving Agency Problems 66

Separation of Ownership and Control 66

Ownership and Control in Private Pensions 66

Ownership and Control in Public Pension Funds 68

Implications for Governance 70

External Controls 71

Implications for the Governing Body of Public Pension Plans 72

Board Composition 73

Nomination and Termination 75

Accountability 77

Performance Measures 78

Roles of the Board 79

Standards of Behavior 81

Information and Transparency 83

Chapter 3 Transparency and Accountability of Public Pension Funds / Anne Maher 91

Relevance 92

Key Components 93

Focus of Liability 94

Good Governance of the Governing Body 95

Effective Accounts and Audit 95

Effective Custody 96

Public Transparency and Reporting 96

Independent Oversight 97

Good Models: What They Do 97

Canada Pension Plan 98

Norwegian Government Petroleum Fund 100

California Public Employees' Retirement System (CalPERS) 101

Irish National Pensions Reserve Fund 103

Models with More to Do 103

Southeast Asia Region 103

Central Provident Fund in Singapore 103

Japan 104

Annex 3.A The Norwegian Petroleum Fund

Key Figures, 2002 105

Chapter 4 The Canadian Experience on Governance, Accountability and Investment / John A. MacNaughton 107

Governance 111

Integrity 114

Investment Policy 116

Accountability 120

Chapter 5 Public Pension Funds Accountability: The Case of Ireland / Anne Maher 125

Background to the Irish Fund 125

Present Pension Arrangements 125

Recommendation for Fund 126

Fund Establishment 127

National Pensions Reserve Fund Act, 2000 127

Progress of the Fund since Establishment 129

Objective and Mission Statement 129

Decision on Investment Strategy and Portfolio Construction 129

Appointment of Service Providers 130

Decision on Market Entry Strategy 131

Performance 131

Accountability: Requirements and Practice 132

Responsible Party 132

Accountability Requirements in the Legislation 133

Accounts and Audits 134

Report and Information to the Minister 134

Appearance before the Committee of Public Accounts 135

Other Requirements for Accountability 135

Other Ways of Accounting to the Public 137

Meeting the Requirements in Practice 137

Public Reaction 137

Annex 5.A Portfolio Construction 139

Annex 5.B Market Entry Strategy

"Averaging In" 140

Annex 5.C Progress 141

Annex 5.D The National Pensions Reserve Fund

Section 12 Guidelines 142

Annex 5.E National Pensions Reserve Act, 2000; Part 4: Accountability and Reporting 147

Chapter 6 Key Differences in Public Pension Fund Management between Ireland and Poland / Krzysztof Pater 151

Funds' Main Objectives and Funding 152

Governance 153

Investment Policy 154

Public Awareness 155

Chapter 7 Governance of Public Pension Funds: New Zealand Superannuation Fund / Brian McCulloch, Jane Frances 157

Context 158

New Zealand Superannuation Policy 158

Implications for Crown Finances 163

Policy Objective 164

Smoothing Crown Finances 164

Features of Policy Design 168

"A clearly defined portfolio of Crown financial resources..." 169

"... managed by an independent governing body..." 172

"...with explicit commercial investment objectives..." 178

"...and clear accountability." 187

Implementation Experience 194

Development and Passage of Legislation 194

Board Appointment 194

Fund Establishment 196

Capital Contributions 197

Other Crown Financial Portfolios 199

Circumstances of the Main Entities 199

Chapter 8 Investment Policies, Processes and Problems in U.S. Public Sector Pension Plans: Some Observations and Solutions from a Practitioner / John H. Ilkiw 211

Part I Background Information 212

Distinguishing Public Sector Pension Plans from Other Plans 212

Importance of U.S. Public Sector Pension Plans 213

Part II Toward Better-Informed Investment Policy Setting 214

Investment Policies Involve Two Big Risk-Return Decisions 214

Generic AA Decision Process 215

Uncertain Parameters and the "Perils of Optimization" 215

Differential Levels of Parametric Uncertainty 217

Two-stage AA Recognizes Differential Parametric Uncertainty 218

Clarifying Expected Impact on Fund Performance 221

End Result: Higher-Confidence Policy Portfolios 223

Part III Poor Governance Structures and Procedures Impede Successful Implementation of Investment Policies 223

Poor Fund Governance: Costs, Descriptions, and Prescriptions 223

Seven Hurdles to Better Fund Governance 224

Four Organizational Hurdles 224

Three Behavioral Hurdles 228

Part IV Trustee-Focused Report for Measuring and Monitoring Fund Performance 233

Chapter 9 The Norwegian Petroleum Fund / Knut Kjaer 241

Governance 243

Accountability 245

Investment Policy 245

Active Management 250

Chapter 10 Governance and Investment of Provident and Pension Funds: The Cases of Singapore and India / Mukul G. Asher 259

The Case of Singapore 259

What Needs To Be Done? 267

The Case of India 268

Governance and Investment Policies and Issues 269

EPFO Investment Policies and Performance 270

EPFO's Rate of Return 272

Governance Issues 273

Civil Service Pensions 274

Chapter 11 Supervision of a Public Pension Fund: Experience and Challenges in Kenya / Edward Odundo 281

The Retirement Benefit Act 282

The National Social Security Fund 284

Main Issues 284

Diagnosis 285

Addressing the Issues 285

Implementation Issues 286

Lessons from the Kenyan Experience 286

Reform Agenda 287

Table 1.1 Implicit Public Pension Debt of Low- and Middle-Income Countries 4

Table 1.2 Regional Distribution of Public Pension Funds 5

Table 2.1 Agency Relationship Characteristics 53

Table 2.2 Allocation of Assets for 26 Pension Funds (% of Portfolio) 65

Table 2.3 Board Composition (fraction of board) 75

Table 5.1 Benchmarks 130

Table 7.1 Timeline of Events 195

Table 7.2 Crown Financial Assets and Liabilities (NZ$ millions) 198

Table 8.1 Sources of Assets for U.S. Retirement System, 2001 213

Table 8.2 Ten Largest U.S.

Employee Pension Funds, 2001 (as of September 30, 2001) 214

Table 10.1 CPF Contribution Rates (applicable as of January 1, 2004) 261

Table 10.2 Various Schemes Under Singapore's CPF System 262

Table 10.3 Sensitivity of Results to Potential Policy Changes 266

Table 10.4a India

Investment Guidelines of the EPFO 271

Table 10.4b India

Investment Guidelines of the IRDA 271

Table 10.5 Rates of Contribution for EPFO Schemes, 2001 272

Figure 1.1 Implicit Public Pension Debt in Selected OECD Countries, 1994 3

Figure 2.1 Investment Restrictions (percentage of funds surveyed) 63.

Notes:

Includes bibliographical references.

ISBN:

0821359983

OCLC:

56531447