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OECD Working Papers on Finance, Insurance and Private Pensions No. 6 - page 17 / 33





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institutions, two key roles are those of the chief executive officer (CEO) and the chief investment officer (CIO). Many large pension funds have both of these functions, clearly separated from the board of directors, as well as most reserve funds served by autonomous management entities. For instance, the Canadian reserve fund (CPPIB) has a board of directors and an executive team led by the CEO and including also a CIO, CFO and COO.

To further aid and clarify the distinction between oversight and operational roles, an investment committee should be in place. Whereas the board has the responsibility for setting the broad investment strategy and strategic asset allocation, the investment committee is responsible for evaluating and taking decisions on various aspects of the day-to-day investment of the funds, including the selection and oversight of external managers. The investment committee plays a central role in most reserve funds. It advises the governing body on the investment policy and the fund‘s performance.

The governing body appoints the investment committee from among its own membership, investment officers and external, independent experts. Members of the investment committee need to be knowledgeable about investment matters. It is also important to have representatives of the governing body sitting in the investment committee in order to create an institutional link between the two bodies and ensure smooth communication. For example, it is common for the chairman of the governing body to be a member of the investment committee.


The GPIF has a relatively small staff. As of April 2010, it had 75 employees, compared to, for example, the 566 employees at the Canadian reserve fund (CPPIB). The GPIF Chairman in principle has the triple role of board chairman, CEO and CIO. All these features of the fund‘s governance depart from may be considered international good practice. The lack of a clear separation between operational and oversight roles within the fund is a major problem that goes against OECD recommendations. Ideally, the GPIF should have a Board of Directors and there should be a separate management team led by a CEO or equivalent top manager.

The GPIF has also established an investment committee of a suitable size (up to eleven members), with the requirement for financial and economic experience. As of June 2010, the committee consisted of ten members, three of whom were from academia, three from private companies and two from private think tanks. There is also a requirement to have two representatives each from labour and management. A better mix of the investment committee is recommended again using the size and reputation of the fund to gain world-class talent. Representatives from labour and management would also fit best in a separate board of directors, rather than in the investment committee.

All members of the investment committee also need to be knowledgeable on investment matters and should be subject to strict ―fit-and proper‖ requirements, including investment knowledge as well as professional experience, covering academic as well as other relevant experience. Such requirements do not appear to be in place currently.

None of the members of the investment committee are full-time investment managers of the GPIF, which apparently results from the cost constraints imposed by the regulations of Independent Administrative Agencies. Given the size and the responsibility of the GPIF it would be desirable for some


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