2020 was by just about any measure, unprecedented. Market volatility, regulatory change and the need to make decisions quickly – but largely remotely – put more emphasis than ever on dynamic and effective decision-making in pension investment committees. It was a true test of robust governance.
We observed that those with the most effective governance structures and processes were able to do three things. They were able to protect the investment portfolio against the severe market downturn. Then, they were able to re-risk when equity markets recovered from the short, sharp shock. And finally, they were able to take advantage of other opportunities brought about by market dislocation, such as those in illiquid credit. Together, they demonstrated how the quality of decision making is actually financially material.
That’s not a new concept. It’s been true for decades, but it perhaps merits rethinking what excellent looks like in this environment. We have set out ten key attributes of high performing investment committees supported by an effectiveness tool, to help investors measure and manage their governance quality.