Two experts in finance and pension fund management recently teamed up to write a new book aimed at helping pension fund boards make better decisions in an increasingly complex and competitive environment.
Martijn Vos, chief operating officer at Ortec Finance, a Rotterdam, Netherlands-based risk management consultant, and Alfred Slager, professor of pension fund management at TIAS School for Business and Society in Tilburg, Netherlands, drew from their roughly 50 years of combined experience in the field to write the book "Decision Making for Pension Boards: How to Make Good Decisions and Get Things Done," which came out in early October.
Noting that global pension boards are currently overseeing assets of some $48 trillion — an amount equal to the combined GDP of the U.S., China, Germany and Japan — the authors lay out ways that pension plans can manage for both the short-term and long-term, particularly during periods of economic crisis.
"There are no manuals to help pension boards and we sought to help create one they can use," said Vos, who has advised institutional clients since 1995. "We especially focus on how to use models effectively in their decision-making protocols."
The book presents examples of how good governance and decision-making, particularly in asset allocation, has led to consistently good returns at some funds, while citing other boards whose poor decisions led to weak returns by missing recovering markets. The book also discusses how strategic asset allocation modeling and asset-liability modeling can be improved to help boost returns,
"While many (boards) are working hard to make good decisions, there is a lot of room for improvement," said Slager, who has held various positions in the pension fund industry, including at ABP, the €450 billion ($477 billion) Dutch pension fund, where he is currently the investment committee chair and a non-executive board member. "Good decisions help achieve better retirement outcomes," he said.
While the authors are both based in the Netherlands, the advice applies to pension funds in Europe, Asia and North America, they said. However, the authors concede that there are some key differences between U.S. and European pension boards, such as with ESG, which is facing a backlash from conservatives in the U.S., but is deeply established in Europe.