Pension funds put spotlight on risk management
There is renewed focus on risk measurement and monitoring practices in the pension fund industry as a result of the international financial meltdown last year. Global pension funds are reviewing their processes and procedures to harness new tools that will create a fundamental change in the monitoring of investment and counterparty risk.
‘The new toolkit is required to improve the speed and depth of information available to pension fund trustees in order to assess the level of exposure in their investments. There will need to be a re-engineering of traditional practices to assess risk and performance in line with the high levels of market volatility and pressure on liquidity’, said Wade McDonald of State Street Bank and Trust in the United Kingdom.
He was speaking at a seminar of the Principal Officers Association (POA) in Benoni this week.
In an interview he explained that positive changes are possible based essentially on powerful new analytical tools that can consolidate information across local South African and global investments to significantly reduce the time taken to create management information for pension funds to be able to stress test the risks on the assets in the funds. This will make it possible for the South African pension fund industry to improve risk monitoring and to progressively enhance their governance processes on behalf of the members.
McDonald, who heads up State Street’s customer franchise in the UK, Middle East and Africa, pointed out that what is needed now is a fusion of global best practice and capability with the already well established and governed South African pensions industry.
He complimented the POA on their leadership role in assessing how risks could be better managed and highlighted that governance and transparency around all aspects of the investment value chain are critical global themes during these uncertain times.
