UK - Providing trustee boards with weekly updates on the financial position of the fund does not encourage investment short-termism but instead makes them more "relaxed" to market volatility, according to the chief executive of BP Trustees Limited.
Speaking at a seminar on 'The shape of pension funds in a post recession world' at the IPE awards last week, Sally Bridgeland told delegates the "thing that helped us get through the crisis was our own governance. And our concern is how other pensions, without our resources, have coped".
The BP pension fund, which had assets of around £12.7bn (€14.1bn) to the week ending 13 November 2009, currently approximately 75% of the fund invested in equities, of which 9% is allocated to private equity. "We have a long-term belief in the equity risk premium and in the equity allocation," Bridgeland said.
The scheme is mainly managed in-house and trustees have a "collaborative relationship" with the internal management, according to Bridgeland - a move which appears to ease trustee concerns during turbulent times.
"We keep the rest of the trustee board informed of what's going on, and they get weekly updates and so they know that the fund value went up by £1m last week".
However, she argued: "This is not encouraging short-termism. If you tell them every week what is going on they don't get caught up in the quarterly figures, they are more relaxed and see the swings in the markets."
Bridgeland told attendees that the crisis had "brought home" to pension funds the importance of having very simple structures and understanding the risks you are taking before you invest.
Going forward, she noted pension funds' investment strategy might focus more on potential opportunities thrown up by the different stages of the economic cycle.
"Something like infrastructure and certain kinds of property would seem to tick some boxes. It is on the drawing board, but it depends on the opportunities of the economic cycle," she added.
Bridgeland revealed the scheme is recruiting a chief risk officer to look at the overall risk framework of the pension fund, with a focus on the "difficult to measure" risks.
At the same time, trustees have also stepped up monitoring of the employer covenant. She said trustees are "checking the contractual relationship and agreement in place with our employer" to provide reassurance that the company is "good for" any future annual contributions the scheme might require.
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