Results matter more than governance

December 2012

Cardano, the leading investment advisor and fiduciary manager, has today called for greater focus on achieving better funding level results when trustees appoint fiduciary managers, in addition to the governance benefits that can be achieved.

Richard Dowell, Head of Clients for Cardano UK, commented: “Good governance around investment decision making should help facilitate the desired results, but good governance is not itself the goal. You can have a great governance process for choosing fund managers in a particular area, but this may not have a big financial impact on the trustees’ main focus – the funding level.”

“For example, a fiduciary manager may have responded quickly to serious problems at one of the underlying fund managers and moved quickly to replace them, improving performance by £1m or so compared to staying with the manager. This looks like good governance, because the fiduciary manager responded faster than the trustees could. But in the meantime, the funding deficit may have increased by £100m, because no one was focussing on protecting against falling equity markets or interest rates, which are much more material.”

“Improving the speed of decision-making and becoming more responsive to investment opportunities and risks is certainly important. However to be most aligned with trustees’ objectives we believe that fiduciary managers should be prepared to be measured based upon improving the scheme’s funding level in a planned and controlled way.”

Release date 12 December 2012