alt=''

The importance of good governance

clock • 1 min read

The correlation between good governance and investment performance...

Reviewing the governance 

Often trustees will gradually increase the level of delegation over time as they become more comfortable with the fiduciary arrangement, and many providers are flexible enough to offer this change in delegation over time. By creating a transparent and well-structured governance framework, trustees retain control and ultimate responsibility for the operation of the pension scheme.  Working through the sort of governance framework we outline below should help to ensure clear accountability and requires that all roles and responsibilities are clearly documented from the outset. In this context, the owner has full responsibility for each decision/activity, and where necessary is supported by an advisor for this action. An overseer takes responsibility, where appropriate, for monitoring the actions of the owner of the decisions.  A blank copy of this framework is provided at the end of the guide for trustees to populate in line with their pension scheme's current arrangements.

What is the value of good governance?

Central to fiduciary management is the principle of improving the governance of pension schemes. There has been a great deal of research around whether a ‘good governance premium' exists for pension schemes. It is difficult to objectively measure governance quality to assess this premium. Indeed, many studies rely on self-assessment techniques. However, qualitative approaches seek to estimate the following common themes:

-- The expertise of the trustee board

-- The time and resources available

-- The decision-making processes

One such study identified a positive correlation between good governance and investment performance, estimating that pension schemes with good standards of governance added 1-2% per annum in investment performance.1

1 Ambachtsheer K, Capelle R, & Lum H (2006), Pension fund governance today:

Strengths, weaknesses, and opportunities for improvement.

More on Investment

LGPS and MP pension scheme back social infrastructure fund

LGPS and MP pension scheme back social infrastructure fund

First close of the NSIIF to provide £100m investment to be deployed into real estate

Martin Richmond
clock 31 March 2025 • 2 min read
Partner Insight: Robeco Active Quant - It's all about predictable results

Partner Insight: Robeco Active Quant - It's all about predictable results

Robeco
clock 31 March 2025 • 5 min read
Border to Coast calls for reforms to boost productive asset investments

Border to Coast calls for reforms to boost productive asset investments

LGPS pool says there is ‘significant appetite’ for investment in productive assets

Martin Richmond
clock 25 March 2025 • 3 min read
Trustpilot