By Mark Smulian
A CIPFA panel has called for radical changes to the Local Government Pension Scheme regulations after finding that tens of millions of pounds are being lost.
A CIPFA panel has called for radical changes to the Local Government Pension Scheme regulations after finding that tens of millions of pounds are being lost.The Pensions Panel’s proposals followed a survey of 67 fund managers taken last year against the backdrop of turmoil in the financial markets.
Suggested changes include: allowing a ‘prudent level’ of investments not traded on regulated markets; avoidance of excessive reliance on any asset, issuer or group of undertakings; investment in derivatives to be permitted only where these reduce risks and assist efficient portfolio management; and powers to use overseas fund mangers.
The survey found ‘examples where legal costs and additional fund management costs have accrued from amending strategies to fit with the regulations. If replicated across the [funds], these costs could run into tens of millions.’
Panel chair Bob Summers said: ‘Our survey has found that while many funds have begun to explore alternative markets and to develop ever more sophisticated risk management strategies, many more feel constrained in doing so by the current investment regulations.’
Survey results showed that 52% of managers thought the regulations were detrimental to efficient portfolio management and 57% said that they barred access to improved risk management strategies.
