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.

The board and/or management seek professional safekeeping of the investment assets of the social security institution, whether internally or externally managed.

Investment proposals generated internally or externally are subject to appropriate due diligence.

Active, passive or hybrid mandates are implemented to achieve the identified investment objective considering the governance budget, investment beliefs and investment efficiency.

The portfolio is constructed with appropriate efficiency and diversification.