Investment functions will be undertaken by different bodies or institutions. In order for the governance process to be effective, the roles and responsibilities of each body and how these interact will be clearly defined and communicated.

It is important that the way the bodies responsible for the investment process are set up and interact ensures that the investment governance process can be carried out effectively and in line with objectives.

The bodies and their roles and responsibilities need to be defined clearly. How the bodies work together and interact is also important to ensure coordination in the duties undertaken and that governance objectives are ultimately met.

The investment mission and supporting goals are clearly defined and have commitment from the relevant stakeholders.

Strong investment beliefs that command institution-wide support, are aligned with objectives and inform all investment decision-making, are agreed and documented.

Investment is essentially about making judgements and decisions in the present, typically with reference to the past, to cope with or exploit an uncertain future. Investors do this by using their underlying beliefs about how the world works. The quality of those underlying beliefs is a major determinant of success in investment.

This part of the guidelines considers the principles underlying the structure, mechanism and processes put in place in the investment of reserve funds. These principles should form the initial building blocks of an investment governance process. They set down the investment beliefs and the missions and goals which underlie any investment process. These principles should be regularly reviewed to ensure that the ensuing investment process correctly reflects them and takes them into account, as they underpin the structure and mechanism put in place.

The following guidelines are organized in four parts:

Part A, Investment Governance Principles

Part B, Investment Governance Structures

Part C, Common Processes

Part D, Processes Specific to Internal and External Investment Management

These guidelines are consistent with the ISSA Guidelines on Good Governance, a comprehensive set of guidelines covering a range of internal governance processes required in the administration of social security institutions.

For these guidelines, the definition of investment governance begins with describing the key elements of a system of decision-making and oversight used to invest the assets of a fund. Thereafter, the definition extends to define investment governance as this relates specifically to the management of reserve funds of social security institutions.

The ISSA Guidelines on Investment of Social Security Funds allows members to follow a progressive process of governance. This starts with the setting up of the various structures involved in the process and includes defining roles and how these interact with the processes to be set up in order that governance objectives are met. These processes include defining and monitoring an investment strategy, monitoring performance and reporting.

The guidelines presented here are applicable to the board, management, investing institution, investment committee and investment units. While recognizing that some social security institutions carry out investment management internally while others use external managers, they aim to allow institutions to follow a progressive process of governance.