NSFM Consultation on Fiduciary Duty Featured in FairPensions Seminar Series at Cass Business School

Recommendations for modernizing the legal duties of pension fund managers, initially put forth in NSFM's Second Consultation Paper, are being highlighted in a FairPensions' seminar series on Exploring the Future of Fiduciary Obligation at London's Cass Business School.  NSFM participant and Consultation Paper co-author, Keith L. Johnson, kicked off the seminar series on 10 May 2010 with a presentation on the evolution of fiduciary duty in the context of historical trends, market developments and changes in the economy.  His seminar paper, "Back to the Future of Pension Trust Fiduciary Duties," concludes that interpretation of fiduciary principles must evolve in response to the growing economic influence of pension funds, marketplace obsession with short-term performance, increased use of passive investment strategies, global proliferation of market complexity, expanded trustee delegation of authority to advisors and the decline in long-term retirement security.
Mr. Johnson argues that legal advisors add to market volatility by encouraging a "run with the herd" approach to pension investment, while downplaying legal obligations to impartially manage systemic and other long-term risks so as to not favor the interests of one generation over another.  He emphasizes that traditional trust law intolerance for fiduciaries' conflicts of interest has been diluted by the increasing transfer of influence to advisors and consultants which often have conflicts of interest and fall outside the trustees' duty of loyalty to pension fund participants.  He also urges a renewed focus on measuring pension fund success in achieving retirement security for all participants, instead of tracking only market-relative investment portfolio results, and counsels that a broader approach to pension fund risk management is required.