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OECD Working Papers on Finance, Insurance and Private Pensions No. 6 - page 20 / 33





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important that management fees are accurately measured. Where only some expenses are charged to the fund, the additional costs should be disclosed by the relevant body.

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    Reserve funds should be subject to a strict disclosure policy, requiring them to make their annual report publicly available, containing its audited financial statements as well as information on asset allocation and performance.15

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      Other documents that should be publicly disclosed include the independent audit and the code of conduct.

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    Additional oversight may be exerted by relevant public entities (for example, the pension fund supervisory authority) and parliament, as the accountability of the governing body calls for regular reporting of its activities to the relevant government authority (as well as the public at large).


The following considers whether the GPIF conforms with the above requirement:

  • Auditors, actuary, custodian: though an independent audit is carried out, the GPIF has not established an internal audit committee - or indeed other sub-committees which make up a good governance structure (for instance, a governance committee, a risk-management committee). It is not clear that the custodial aspect of the fund is fully independent and therefore in conformity with OECD guidelines and international good practice.

  • Risk-management systems: the GPIF is currently being run as a low risk fund therefore it is not clear that a world-class risk-management system is in place. The GPIF does not appear to feel the need for sophisticated risk-management tools or real-time information systems. Again the issue of costs (not being independently set) may be part of the problem. Even with a basic investment structure, the fund would likely benefit from better risk-management analysis. The GPIF would then be able to assess whether it is considering the risks it is facing properly not just investment risk but also administrative, operational risks, etc.

  • Codes of conduct and conflicts of interest: codes of conduct are based on a duty of care and a duty of loyalty. Such duties are expressly mentioned in the Japanese reserve fund‘s statement of investment principles, but it is not clear that separate codes of conduct have been drawn up.16


One of the central pieces of disclosure is the annual report, which describes the fund‘s investment operations during the year and contains the financial statements and the independent auditor‘s certification. All reserve funds are required to publish an annual report and to disclose the following information: portfolio allocation, by broad asset classes; investment performance; operational expenses.


Some reserve funds pay their governing and other board members (often renumerated as civil servants). In other countries they serve on a voluntary basis. Given the size, and potential influence of the GPIF, it should be


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