Where appropriate and permitted by the board, the investing institution may take a direct equity or ownership stake in a publicly quoted, private or state-owned enterprise.

Such an investment may confer voting rights and permit the institution to influence directly certain activities of the organization in which it has taken part or, when there is full ownership, include representation on the board of a company or organization.

Sufficient procedures are put in place to ensure an appropriate level of operational due diligence is conducted on investing institutions.

The investment strategy set out by the board or management is efficiently implemented.

The guidelines set out in this section refer to the situation where part or all of investment management is carried out by an internal investment unit. In such cases, the investment process will be the responsibility of employees of the social security institution and, although there may be external advice and support provided, the ultimate responsibility will lie with those employed directly by the institution.

This part of the guidelines refers to investment processes carried out by internal and external investment management units respectively.

Although there are many common areas between the processes for internal and external investment management, there are a number of governance requirements that apply solely or differently to either internal or external investment management.

The following guidelines are organized in two sections:

Section D.1, Internal Investment Management

The investing institution follows the prudent person principle in managing the funds of the social security institution.

This principle requires that a person exercises the same care, diligence and skill in discharging his/her duties of office as a reasonably prudent person would exercise in comparable circumstances. The prudent person principle is integral to the fiduciary duties of the board and management in administering and managing the funds of the social security institution.

The social security institution’s policy on disclosure of information (as outlined in the ISSA Guidelines on Good Governance adequately covers the disclosure of relevant investment information. The board and management abide by the policy, including the parameters as to when to exercise discretion in providing information to stakeholders. The policy covers the disclosure of any potential conflicts of interest.

All of the investing institution’s internal investment managers and external investment managers (“managers”) are monitored from a forward-looking perspective, with the key aim of determining whether they are likely to generate future outperformance net of fees.

Performance and risk analysis is conducted and reported as part of the monitoring process. Performance and risk analysis and reporting is undertaken for the portfolio as a whole and also by asset classes, direct investments and external managers. Performance and risk is reported and aggregated by an independent performance measurer.

The investing institution’s assets are valued in accordance with recognized international or national accounting standards where appropriate, as well as industry best practice. Valuations are performed, or at least verified, independently.