GLOBAL - The Organisation for Economic Co-operation and Development (OECD) has flagged up the "prudent person principle" as its core philosophy within newly released guidelines on pension fund asset management.
The guidelines mark an initiative by the 30 OECD countries to set international standards for the oversight and day-to-day running of pension assets.
In following the prudent person rule, the OECD stipulated funds should; define and follow an overall investment policy; require the governming body to act in the “best interest” of beneficiaries when investing plan assets; establish internal controls and procedures to implement and monitor the way investments are managed; identify and measure the risks to which the fund is exposed and put in place mechanisms to monitor and manage those risks.
To allow trustees a clear picture of how the fund was performing, the OECD said the market value of the fund’s assets and liabilities should be disclosed on a regular basis.
The organisation believed legal provision should not prescribe a minimum level of investment for any given category of investment, nor prohibit investment abroad by pension funds.
In addition the OECD stressed portfolio limits should be set only in specific instances, citing the capping of investment in securities of individual companies as a example.
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