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II International Pension Funds Conference. PENSION FUNDS INVESTMENTS: Trends, Regulations and Corporate Governance. Santiago, 15 March 2001. inverco. 2/13. A . INVESTMENT PRACTICES. Restrictions Portfolio breakdown Different speeds Directive proposal. B . CORPORATE GOVERNANCE.

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  1. II International Pension Funds Conference PENSION FUNDS INVESTMENTS: Trends, Regulations and Corporate Governance Santiago, 15 March 2001 inverco

  2. 2/13 A. INVESTMENT PRACTICES • Restrictions • Portfolio breakdown • Different speeds • Directive proposal B. CORPORATE GOVERNANCE • Growth of institutional ownership • OECD principles • Shareholder activism • Social Responsible Investments inverco

  3. 3/13 A. INVESTMENT PRACTICES • Restrictions inverco

  4. 4/13 A. INVESTMENT PRACTICES • Portfolio breakdown (%) Source: William Mercer (data 2000) • Prudent man rule vs. Restrictions • Introduction of EURO inverco

  5. 5/13 A. INVESTMENT PRACTICES • Different speeds Sources: European Commission, William Mercer inverco

  6. 6/13 A. INVESTMENT PRACTICES • Directive proposal (I) • Invest in a “prudent manner” • DC Schemes: • ensure security, quality, liquidity • proper diversification • sponsoring undertaking ( <5% ) • Assets to cover technical provisions • nature and duration of benefits • proper diversification • sponsoring undertaking ( <5% ) inverco

  7. 7/13 A. INVESTMENT PRACTICES • Directive proposal (& II) • States: not require particular categories of assets • States: not prior approval or notification requirem. • Investment possibilities: • Traded shares or corporate bonds: • assets covering technical provisions: up to 70% • DC schemes: 100% • Non-matching currencies: at least 30% • Risk capital markets • States: more stringent rules (prudential reasons) inverco

  8. 8/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (I) • 1981: 3,2 BILLION US DOLLARS • 1991: 15,6 BILLION US DOLLARS • 1998: 30,3 BILLION US DOLLARS AVERAGE ANNUAL GROWTH RATE (1990-1998) Source: OECD Institutional Investors 2000 inverco

  9. 9/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (II) INSTITUTIONAL INVESTORS:DISTRIBUTION Insurance Companies 36% Pension Funds 32% Pension Funds 28% Insurance Companies 27% 19% Investment Funds 30% Investment Funds 17% Others 11% Others 1.990 1.998 Source: OECD inverco

  10. 10/13 B. CORPORATE GOVERNANCE • Growth of institutional ownership (&III) 1998: FINANCIAL ASSETS (% GPD) 3.516 inverco

  11. 11/13 B. CORPORATE GOVERNANCE • OECD principles • Right of shareholders • Equitable treatment of shareholders • Role of stakeholders • Disclosure and transparency • Responsabilities of the Board inverco

  12. 12/13 B. CORPORATE GOVERNANCE • Shareholder activism • Iniciatives: • Calpers • TIAA-CREF • Hermes • Commitments to exercise fiduciary responsa- bilities (voting): • US: ERISA • UK: NAPF • European iniciatives: • Cadbury and Greenbury Codes • Others: Viennot, Olivencia • Deminor inverco

  13. 13/13 B. CORPORATE GOVERNANCE • Social Responsible Investments • Indexes: Domini • Consultants: EIRIS • UK Disclosure obligation inverco

  14. II International Pension Funds Conference PENSION FUNDS INVESTMENTS: Trends, Regulations and Corporate Governance Santiago, 15 March 2001 inverco

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