Mobilising Collaborative Opportunities between Pension Funds

Abstract

Many collaborative initiatives amongst pension funds and their agents have emerged over recent years in an attempt to improve the workings of the market mechanism, most of which have been targeted at changing corporate, rather than investor behaviour. It has been argued that more consideration needs to be given to the development of collaborative initiatives that specifically target investor behaviour to overcome the problems of short-termism, absence of shareholder activism and poor pension fund governance standards.

This research paper develops a theoretical framework and applies this to identify the conventions associated with each investment problem, the target agents for change, the power agents and their inter-relationships.

The analysis reveals that, despite the significant number of collaborative initiatives that have been established, there are many areas that remain overlooked. For example, whilst some initiatives have emerged to tackle short-termism, these still do not directly confront the problems of excessive reliance on asset-based benchmarks and the short-term criteria used to select and review fund manager performance. On the goal of increasing shareholder activism, a number of collaborative initiatives have emerged but these tend to be regional in focus and narrow in their membership base, with no effort to establish international collaboration and standards in shareholder activism. Finally, improving pension fund governance is the grey area that most collaborative arrangements fail to address and there is a need to mobilise regulators and industry bodies to develop better standards.