UK - Pension funds are being forced to adopt the mindset of short-term investors by solvency regulation and accounting standards, the outgoing chairman of the UK's National Association of Pension Funds has argued.

Speaking at yesterday's launch of the Kay Review - initiated by the Department for Business, Innovation and Skills (BIS) to examine the role of government regulation in a short-term investment approaches - Lindsay Tomlinson highlighted that, while institutional investors ideally invest over a longer time horizon, in practice, this stance was made problematic by the regulatory burden placed upon them.

He argued that it made little sense to berate short-termism "without thinking about the pressures that are applied to long-term investors" such as life assurance companies and pension schemes - referencing both accounting standards and solvency regulations.

Tomlinson said the environment made the above institutional investors "as short-term as everyone else", even if this ideally should not be the case.

"Please give us some relief and let us think long term," he said.

He added that globalisation had obviously changed the ease with which major shareholders could engage with companies.

Referencing the UK's Stewardship Code, he said: "Making our much-loved principles-based governance regime work is going to require influencing skills being applied to international owners of UK companies - welcome to the world of the long-haul frequent traveller."

The organisation's chairman also highlighted the inherent conflict between many institutional investors' long-term outlook and an investment system that rewarded those who sought only short-term gains.

"We built an investment system in which many people collect substantial rewards for stimulating short-term behaviour," he said. "You can't create a system of this sort and then complain when that stimulus works - so don't just look at the investors, look also at the investment banks and the other players in the chain."

However, Tomlinson, whose role as NAPF chairman will be filled by Barclays UK Retirement Fund chief executive Mark Hyde Harrison from next month, concluded that, despite this environment, investors had not done badly given the context of the current system.

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