BELGIUM - The Belgian regulatory authority is considering making it mandatory for pension funds to establish a statement of investment principles outlining certain rules and regulations that asset managers will have to comply with.
Françoise Masai (pictured), director at the Belgian regulatory authority, the Banking Finance and Insurance Commission or the CBFA said: “So far we have had no time to look at the governance of pension funds. Now we feel we need to examine whether it is necessary to have a framework for managers. We may perhaps issue a soft regulation to say what we expect, what pension funds can and cannot outsource to external managers and the conditions under which they may do so etc.
“When pension funds’ outsource their assets, we don't know exactly what level of control they exercise on those activities. So this is much more of a framework to tell pension funds that you are responsible for what happens, i.e. you cannot leave everything to asset managers.”
Over the last couple of years, bigger pension funds in Belgium have been issuing some guidelines to investment managers but some funds do not have any systems in place.
As Johan Heymans, managing partner at Watson Wyatt in Brussels pointed out, quite a lot of asset managers do not even have a clear mandate governing their investment.
“It’s a middle of the road thing - either conservative or aggressive. Pension funds trustees or board members have the responsibility of investment management but as such it is delegated to the managers. But in delegating to managers, there is a need to provide some kind of clear set of guidelines which up until now was never a legal obligation. But I think, this will change and it is a good thing. It’s a good thing in the light of good pension fund governance - what you can and cannot do as an asset manager.”
He added: “The new statement of investment principles may lay down for example what the maximum limits of investing in equities or bonds are or what is tracking error or what kind of risk you are allowed to take. It’s up to pension fund boards to give those guidelines and then it is up to the manager to work within those guidelines.”
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