Achieving Investment Excellence

Achieving Investment Excellence

by Kees Koedijk, Alfred Slager, Jaap van Dam
Released April 2019
Publisher(s): Wiley
ISBN: 9781119437659

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Book description

Crucial methods, tactics and tools for successful pension fund management

Achieving Investment Excellence offers trustees and asset managers a comprehensive handbook for improving the quality of their investments. With a stated goal of substantially and sustainably improving annual returns, this book clarifies and demystifies important concepts surrounding trustee duties and responsibilities, investment strategies, analysis, evaluation and much more.

Low interest rates are making the high cost of future pension payouts fraught with tension, even as the time and knowledge required to manage these funds appropriately increases — it is no wonder that pensions are increasingly seen as a financial liability. Now more than ever, it is critical that trustees understand exactly what contributes to investment success — and what detracts from it. This book details the roles, the tools and the strategies that make pension funds pay off.

  • Understand the role of pension funds and the fiduciary duty of trustees
  • Learn the tools and kills you need to build profound and lasting investment excellence
  • Analyse, diagnose and improve investment quality of funds using concrete tools and instruments
  • Study illustrative examples that demonstrate critical implementation and execution advice

Packed with expert insight, crucial tools and real-life examples, this book is an important resource for those tasked with governing these. Achieving Investment Excellence provides the expert insight, clear guidance and key wisdom you need to manage these funds successfully.

Table of contents

  1. Cover
  2. About the Authors
  3. Acknowledgments
  4. Foreword
  5. Introduction
    1. LEVELS OF EXCELLENCE: ASSESSING AND IMPROVING YOUR PRACTICE
    2. HOW TO USE THE BOOK
    3. CHAPTERS OF THE BOOK
    4. PART I: PENSION FUNDS: UNDERSTANDING THE ROLE, SHAPING THE MISSION
    5. PART II: DESIGNING THE PROCESS
    6. PART III: IMPLEMENTING THE INVESTMENTS
    7. PART IV: ORGANIZING THE BOARD
    8. PART V: LEARNING, ADAPTING AND IMPROVING
    9. SELF-REFLECTION QUESTIONS
    10. ENDNOTE
  6. PART One: Pension Funds: Understanding the Role, Shaping the Mission
    1. CHAPTER 1: The Role of Pension Funds, and the Role of Boards
      1. THE ROLE OF PENSION FUNDS
      2. THE PENSION TRIANGLE
      3. DUTIES OF TRUSTEES
      4. UNDERSTANDING AND MANAGING YOUR STAKEHOLDERS
      5. ENDNOTES
    2. Case Study—GEPF
      1. THE DUAL MANDATE DILEMMA
      2. ENDNOTES
    3. CHAPTER 2: Developing Purpose, Mission, Vision, and Goals
      1. THE FUNCTIONS OF A PENSION FUND
      2. PURPOSE
      3. MISSION
      4. VALUES
      5. VISION
      6. STRATEGIC GOALS
      7. ENDNOTES
  7. PART Two: Designing the Process
    1. CHAPTER 3: Grasping the Investment Essentials
      1. INVESTMENT GOALS
      2. UNDERSTANDING RETURN CONCEPTS
      3. UNDERSTANDING RISK CONCEPTS
      4. STEERING YOUR PORTFOLIO
      5. ENDNOTES
    2. Case Study—PFZW
      1. TAKING OWNERSHIP OF AND REBUILDING INVESTMENT PRINCIPLES AFTER THE GREAT FINANCIAL CRISIS
      2. ENDNOTE
    3. CHAPTER 4: Investment Beliefs as Guiding Tools
      1. WHY INVESTMENT BELIEFS MATTER
      2. BASICS OF AN INVESTMENT BELIEF
      3. DEVELOPING A SET OF INVESTMENT BELIEFS
      4. WHEN, IF EVER, IS THE TIME TO CHANGE INVESTMENT BELIEFS?
      5. HOW (NOT) TO USE INVESTMENT BELIEFS
      6. ENDNOTES
    4. Case Study—New Zealand Superannuation Fund
      1. BUILDING A GLOBAL INVESTMENT FUND FROM SCRATCH WITH THE MISSION TO MAXIMIZE THE FUND'S LONG-TERM RETURN, AND INTEGRATE CLIMATE CHANGE IN A DEEP WAY CONSISTENT WITH THE LONG-HORIZON NATURE OF THE FUND
      2. ENDNOTES
    5. CHAPTER 5: Designing the Investment Management Process
      1. THE INVESTMENT PROCESS
      2. SETTING OBJECTIVES: ALIGNING GOALS AND RISK APPETITE
      3. FORMULATING EXPECTATIONS
      4. PORTFOLIO CONSTRUCTION
      5. IMPLEMENTATION AND MONITORING
      6. THE INVESTMENT POLICY STATEMENT
      7. ENDNOTES
    6. CHAPTER 6: Organizing the Investment Function
      1. INVENTORIZING INVESTMENT MODELS
      2. DEVELOPING YOUR OWN INVESTMENT APPROACH
      3. ENDNOTES
    7. Case Study – GPFG
      1. BUILDING A LONG-TERM, RESPONSIBLE FUND ON SOLID ACADEMIC AND EVIDENCE-BASED PRINCIPLES
      2. ENDNOTES
  8. PART Three: Implementing the Investments
    1. CHAPTER 7: Implementing the Investment Strategy
      1. ORGANIZING THE IMPLEMENTATION
      2. THE RATIONALE FOR MANAGING COSTS
      3. SELECTION OF MANAGERS
      4. ACTIVE vs. PASSIVE MANAGEMENT
      5. INTERNAL vs. EXTERNAL MANAGEMENT
      6. RELATIONSHIP WITH SUPPLIERS
      7. BRIDGING THE IMPLEMENTATION GAP
      8. ENDNOTES
    2. Case Study—ATP
      1. CREATING SCOPE FOR INVESTMENT SOPHISTICATION THROUGH CLARITY OF OBJECTIVES AND STRONG AND TRANSPARENT RISK MANAGEMENT
      2. ENDNOTES
    3. CHAPTER 8: Building the Investment Portfolio
      1. FRAMEWORK FOR THE INVESTMENT PORTFOLIO
      2. THE BOARD'S ROLE IN PORTFOLIO CONSTRUCTION
      3. CAPITAL MARKET ASSUMPTIONS
      4. ENDNOTES
    4. Case Study—OTPP
      1. ONTARIO TEACHERS' IS THE FUND WITH WHICH THE “CANADIAN MODEL” FOR PENSION FUNDS STARTED. THIS HAS INSPIRED PENSION FUNDS IN CANADA AND GLOBALLY. AT ITS CORE LIES A STRONG GOVERNANCE MODEL AND THE CLEAR CONVICTION THAT A PENSION PLAN SHOULD BE RUN LIKE A BUSINESS
      2. ENDNOTES
    5. CHAPTER 9: Monitoring and Evaluation
      1. MONITORING
      2. WHAT TO LOOK FOR IN MONITORING
      3. WHEN DOES A BOARD MOVE FROM MONITORING TO EVALUATION?
      4. EVALUATION
      5. ENDNOTES
  9. PART Four: Organizing the Board
    1. CHAPTER 10: Becoming an Effective Board
      1. RESPONSIBILITIES OF THE BOARD
      2. BOARD COMPOSITION
      3. WHAT IS EXPECTED FROM BOARD MEMBERS?
      4. APPOINTING NEW BOARD MEMBERS
      5. GOVERNANCE BUDGET OF THE BOARD
      6. BOARD DECISION-MAKING CULTURE
      7. SUPPORTING THE BOARD: EXECUTIVE OFFICE AND STAFF
      8. INGREDIENTS OF AN EFFECTIVE BOARD
      9. ENDNOTES
    2. Case Study—CalPERS
      1. ONCE DAMAGE HAS BEEN DONE, IT IS VERY HARD TO REPAIR. POOR AND POLITICIZED GOVERNANCE FORMED THE BASIS FOR A HIGH PENSION PROMISE, WHICH COULD NOT BE SUSTAINED BY THE RETURNS FROM THE INVESTMENTS. A LACK OF HIGH QUALITY OVERSIGHT LED TO EXCESSIVELY HIGH COST, A POOR INVESTMENT PROCESS, AND AN INVESTMENT ORGANIZATION THAT WAS NOT FIT FOR THE COMPLEXITY OF THE STRATEGY, RESULTING IN DISASTROUS OUTCOMES DURING AND IN THE AFTERMATH OF THE FINANCIAL CRISIS OF 2008–2009. AFTER THE CRISIS, CHIEF EXECUTIVE OFFICER (CEO) ANNE STAUSBOLL AND CHIEF INVESTMENT OFFICER (CIO) JOE DEAR STARTED A RIGOROUS PROCESS TO STRENGTHEN THE STRATEGY AND THE QUALITY OF THE INVESTMENT MANAGEMENT ORGANIZATION
      2. ENDNOTES
    3. CHAPTER 11: Establishing the Investment Committee
      1. ROLES AND RESPONSIBILITIES
      2. MEMBERS OF THE INVESTMENT COMMITTEE
      3. FORMING AN EFFECTIVE INVESTMENT COMMITTEE
      4. A MODEL FOR AN EFFECTIVE INVESTMENT COMMITTEE MEETING
      5. ENDNOTES
    4. CHAPTER 12: Managing the Investment Management Organization
      1. THE ROLES OF THE INVESTMENT MANAGEMENT ORGANIZATION
      2. FUNCTIONS AND TYPICAL EVOLUTION OF THE IMO
      3. ISSUES IN DEALING WITH AN INVESTMENT ORGANIZATION
      4. THE SERVICE LEVEL AGREEMENT
      5. MONITORING AND EVALUATING THE INVESTMENT MANAGEMENT ORGANIZATION
      6. ENDNOTES
    5. Case Study—Future Fund
      1. LONG-HORIZON FUND, A MASTER IN MANAGING AGENCY ISSUES, WITH FOCUS ON THE WHOLE AND NOT ON THE PARTS
      2. ENDNOTES
  10. PART Five: Learning, Adapting and Improving
    1. CHAPTER 13: Learning to Decide and to Take Advice
      1. PSYCHOLOGY OF DECISION-MAKING: BIASES, PREFERENCES, AND HABITS
      2. GROUP PROCESSES ON THE RIGHT TRACK
      3. LEARNING TO MAKE COMPLEX DECISIONS
      4. DECISION-MAKING UNDER PRESSURE
      5. ENDNOTES
    2. CHAPTER 14: Achieving Investment Excellence
      1. THE FIVE ACTIVITIES DRIVING TOWARDS EXCELLENCE
      2. THE LEARNING BOARD AND THE CHARACTERISTICS OF THE LEVELS OF EXCELLENCE
      3. LEVELS OF EXCELLENCE AND THE BOARD LEARNING PERSPECTIVE
      4. THE BOARD'S JOURNEY TOWARDS ACHIEVING EXCELLENCE
      5. ENDURING INVESTMENT EXCELLENCE
      6. ENDNOTES
  11. Self-Reflection Questions
    1. CHAPTER 1: THE ROLE OF PENSION FUNDS, AND THE ROLE OF BOARDS
    2. CHAPTER 2: DEVELOPING PURPOSE, MISSION, VISION, AND GOALS
    3. CHAPTER 3: GRASPING THE INVESTMENT ESSENTIALS
    4. CHAPTER 4: INVESTMENT BELIEFS AS GUIDING TOOLS
    5. CHAPTER 5: DESIGNING THE INVESTMENT MANAGEMENT PROCESS
    6. CHAPTER 6: ORGANIZING THE INVESTMENT FUNCTION
    7. CHAPTER 7: IMPLEMENTING THE INVESTMENT STRATEGY
    8. CHAPTER 8: BUILDING THE INVESTMENT PORTFOLIO
    9. CHAPTER 9: MONITORING AND EVALUATION
    10. CHAPTER 10: BECOMING AN EFFECTIVE BOARD
    11. CHAPTER 11: ESTABLISHING THE INVESTMENT COMMITTEE
    12. CHAPTER 12: MANAGING THE INVESTMENT MANAGEMENT ORGANIZATION
    13. CHAPTER 13: LEARNING TO DECIDE AND TO TAKE ADVICE
    14. CHAPTER 14: ACHIEVING INVESTMENT EXCELLENCE
  12. Appendix A
    1. OECD PRINCIPLES
  13. Appendix B
    1. HOW TO DEVELOP STRATEGIC GOALS
    2. ENDNOTES
  14. References
  15. Index
  16. End User License Agreement

Product information

  • Title: Achieving Investment Excellence
  • Author(s): Kees Koedijk, Alfred Slager, Jaap van Dam
  • Release date: April 2019
  • Publisher(s): Wiley
  • ISBN: 9781119437659