NSFM participants have been at the forefront of growing attention that is being focused on how interpretation of fiduciary duty has impeded efforts to manage many of the long-term and systemic risks to which pension fund assets are exposed. In a recent meeting attended by several NSFM participants, the chief investment officers of three large US pension funds all agreed that traditional legal interpretations of fiduciary duty seem oblivious to many of the real world risks that came to the forefront in the economic crisis. After unrecognized and systemic risks wiped out more than a decade of investment returns, many pension fiduciaries are questioning whether they have an obligation to measure and manage exposure to those risks. They are asking if fiduciaries have a duty to look beyond financial and market-relative measures of risk to address practices that contributed to such widespread damage of future pension security.
Participants in the Network for Sustainable Financial Markets (NSFM) see these issues as central to pension sustainability and have created a Working Group devoted to fostering an evolution in the understanding of fiduciary duty. In addition, NSFM participants and others are organizing educational events for fiduciaries, writing papers and doing research on these issues. The following are just some of the initiatives that illustrate how this evolution of fiduciary duty is taking shape:
The Fiduciary Standard and Beyond (Hennick Centre for Business and Law; FAIR Canada) http://www.hennickcentre.ca/documents/ConferenceBrochure2.pdf.
Rethinking of Fiduciary Duty - Capital Matters VIII Conference (Labor and Worklife Program at Harvard Law School) http://www.law.harvard.edu/programs/lwp/LWPpensions_conferences.html.
Evolving Fiduciary Duty of Public Pension Plans (Institutional Investor Conferences) http://www.sbtklaw.com/files/pdf_news/news_28.pdf.
Modernizing Pension Fund Legal Standards for the Twenty-First Century (Network for Sustainable Financial Markets) http://www.sustainablefinancialmarkets.net/2009/02/09/modernizing-pension-fund-legal-standards-for-the-21-century/.
Posted by Keith Johnson on 9 March 2010