Pension schemes to spend more time on engagement

Key findings from the National Association of Pension Funds 2009 engagement survey show that nearly half (49%) of pension schemes will spend more time scrutinising the actions of their fund managers on engagement issues as a result of the economic crisis.

Over three quarters of funds (78%) said they will give more time to reviewing reporting and 57% said they will pay more attention to votes cast. The survey examined the engagement policies and practices of pension schemes with assets totaling nearly £200 billion.

NAPF Head of Corporate Governance, David Paterson said: "Corporate Governance is in the spotlight more than ever before and our survey demonstrates that pension funds are increasing their focus on engagement policies.

"They have an inherent interest in the companies in which they invest being run well given their long-term objective of being able to meet the pension promises of their members.

"However, there is more work to be done to ensure that pension funds improve the effectiveness of their oversight of both their investment managers and the companies in which they invest."

Other key findings from the survey include:

Pension schemes engage both indirectly and directly with the companies in which they investment. 93% carry out some engagement tasks via delegation to invest managers while 44% of schemes have a policy of direct engagement with the companies in which they invest.

Most pension schemes (70%) consider their engagement policies as having a tangible effect on corporate governance.

The use of the Institutional Shareholders' Committee Principles is increasing - 51% of schemes stated that the principles had been incorporated into their contracts with investment managers, an increase from 33% in 2008.

Schemes face barriers to greater levels of engagement, nearly two-thirds (62%) of respondents said that competing work priorities acted as a barrier to direct engagement, while 59% said that lack of relevant skills was an issue.