Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-8448b6f56d-c47g7 Total loading time: 0 Render date: 2024-04-24T22:28:53.317Z Has data issue: false hasContentIssue false

13 - The future of fiduciary obligation for institutional investors

Published online by Cambridge University Press:  05 April 2014

By
Claire Molinari
Edited by
James P. Hawley ,
Andreas G. F. Hoepner ,
Keith L. Johnson ,
Joakim Sandberg  and
Edward J. Waitzer
Claire Molinari
Affiliation:
University of Oxford
James P. Hawley
Affiliation:
St Mary's College, California
Andreas G. F. Hoepner
Affiliation:
ICMA Centre, Henley Business School, University of Reading
Keith L. Johnson
Affiliation:
University of Wisconsin, Madison
Joakim Sandberg
Affiliation:
University of Gothenburg
Edward J. Waitzer
Affiliation:
York University, Toronto
Get access

Summary

Introduction

The context of this chapter is one of change. The world of institutional investment has been undergoing some fundamental structural shifts for a number of years, and many of these have direct implications for the future of fiduciary obligation.

The defined benefit pension fund, once the mainstay of institutional investment funds, is quickly being replaced by the defined contribution scheme. This transfers the risk of poor investment performance from corporate and state employers to individual beneficiaries. At the same time, pension fund trustees, the traditional bearers of fiduciary obligation, are now rarely the key players in investment decision-making. Virtually all asset owners have delegated day-to-day investment decision-making to asset managers and strategic planning to investment consultants, and whether these agents are bound by fiduciary obligation is often unclear. Finally, trust-based pension funds are increasingly giving way to contract-based schemes operated by large insurance companies. These are governed by the law of contracts, under which fiduciary obligation does not exist.

Type
Chapter
Information
Cambridge Handbook of Institutional Investment and Fiduciary Duty , pp. 159 - 168
Publisher: Cambridge University Press
Print publication year: 2014

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Akerlof, G. A. and Shiller, R. J.. 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism. Princeton University Press.Google Scholar
Anderson, S. 2006. Investment Management and Mismanagement: History, Findings and Analysis. New York: Springer.Google Scholar
Bray, J. 2012. A Student’s Guide to Equity and Trusts. Cambridge University Press.CrossRefGoogle Scholar
Byrne, A., Dowd, K., Blake, D. P. and Cairns, A. J. G.. 2007. “Default Funds in UK Defined-Contribution Pension Plans,” Financial Analysts Journal 63: 40–51.CrossRefGoogle Scholar
Carrera, L., Curry, C. and Cleal, N.. 2012. Changing Landscape of Pension Schemes in the Private Sector in the UK. London: Pensions Policy Institute.Google Scholar
CityUK. 2011. Fund Management. London: CityUK.Google Scholar
Clark, G. L. 2000. Pension Fund Capitalism. Oxford University Press.Google Scholar
Clark, G. L. and Monk, A. H. B.. 2007. “The ‘Crisis’ in Defined Benefit Corporate Pension Liabilities Part II: Current Solutions and Future Prospects,” Pensions 12: 68–81.CrossRefGoogle Scholar
Clark, G. L. and Urwin, R.. 2011. “DC Pension Fund Best-practice Design and Governance,” Benefits Quarterly Fourth Quarter: 36–49.Google Scholar
Clark, G. L., Caerlewy-Smith, E. and Marshall, J. C.. 2006. “Pension Fund Trustee Competence: Decision-making in Problems Relevant to Investment Practice,” Journal of Pension and Economic Finance 5: 91–110.CrossRefGoogle Scholar
Cohen, N. 2012. “Record Deficit for Pension Funds in Red,” Financial Times, January 10.Google Scholar
Dickens, C. 2008. Our Mutual Friend. Australia: Accessible Publishing Systems Pty Ltd.Google Scholar
FairPensions. 2011. Protecting Our Best Interests: Rediscovering Fiduciary Obligation. London: FairPensions.Google Scholar
Finn, P. D. 1977. Fiduciary Obligations. Sydney: Law Book Company.Google Scholar
Governmental Accounting Standards Board. 2012. “GASB Improves Pension Accounting and Financial Reporting Standards,” press release 25 June.
Hudson, A. 2009. Equity and Trusts. London: Taylor and Francis.Google Scholar
Kahneman, D. and Tversky, A.. 1979. “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47: 263–91.CrossRefGoogle Scholar
Kay, J. 2012. The Kay Review of UK Equity Markets and Long-Term Decision-Making: Final Report July 2012. London: HM Government.Google Scholar
Keeton, W. P. 1936. “Fraud – Concealment and Non-disclosure,” Texas Law Review 15: 1–40.Google Scholar
Langbein, J. H. 1996. “The Uniform Prudent Investor Act and the Future of Trust Investing,” Iowa Law Review 81: 641–69.Google Scholar
Langbein, J. H. 2007. “Why Did Trust Law Become Statute Law in the United States?” Alabama Law Review 58: 1069–82.Google Scholar
Law Commission, 1992. “Fiduciary Duties and Regulatory Rules.” Consultation Paper No 124.
Linzer, P. 1981. “On the Amorality of Contract Remedies – Efficiency, Equity and the Second Restatement,” Columbia Law Review 81: 111–39.CrossRefGoogle Scholar
Markowitz, H. M. 1952. “Portfolio Selection,” Journal of Finance 7: 77–91.Google Scholar
Markowitz, H. M. 1959. Portfolio Selection: Efficient Diversification of Investments. New York: Wiley.Google Scholar
Martin, J. E. 2005. Hanbury and Martin: Modern Equity, 17th edn. London: Thomson, Sweet and Maxwell.Google Scholar
McCrum, D. 2011. “Gap in US Pension Plans Hits $388 bn,” Financial Times, September 5.Google Scholar
McCrum, D. and Bullock, N.. 2012. “Funding Gap Doubles for US Corporate Pensions,” Financial Times, January 2.Google Scholar
Munnell, A. H., Aubry, J.-P., Hurwitz, J., Medenica, M. and Quinby, L.. 2012a. “The Funding of State and Local Pensions: 2011–2015,” State and Local Pension Plans 24: 1–14.Google Scholar
Munnell, A. H., Aubry, J.-P., Hurwitz, J. and Quinby, L.. 2012b. “How Would GASB Proposals Affect State and Local Pension Reporting?” Working Paper 2012–17, Center for Retirement Research at Boston College.
Pensions Regulator. 2007. The Governance of Work-based Pension Schemes. London: Pensions Regulator.Google Scholar
Pensions Regulator 2011. Enabling Good Member Outcomes in Work-based Pension Provision. London: Pensions Regulator.Google Scholar
Redgrave, J. 2011. “Full Extent of LGPS Fund Value Fall Revealed,” Pensions Week, May 9.Google Scholar
Richardson, B. R. 2008. Socially Responsible Investment Law: Regulating the Unseen Polluters. Oxford University Press.CrossRefGoogle Scholar
Seetharaman, D. and Klayman, B.. 2012. “GM to Cut about One-Fourth of US Pension Liability,” Reuters.com, June 1.Google Scholar
United Nations Environment Programme Finance Initiative. 2005. Fiduciary Responsibility: A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment. Geneva: United Nations.Google Scholar
Woods, C. 2011. “Funding Climate Change: How Pension Fund Fiduciary Duty Masks Trustee Inertia and Short-termism,” in Hawley, J., Kamath, S. and Williams, A. T. (eds.) Corporate Governance Failures: The Role of Institutional Investors in the Global Financial Crisis. Philadelphia: University of Pennsylvania Press, pp. 242–78.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×