Jaap van Dam’s scientific contributions

This chapter discusses the role of pension funds and the board of trustees. Why do large collective organizations (still) exist in a world where the global financial order and system are transforming at such a breakneck pace and with such profound impact on the structure and configuration of institutions? What part do they play within this context, and what is their actual function? Furthermore, we also investigate role of trustees. A trustee has a specific role and an important task to fulfil that brings about several unique and serious responsibilities. We take a broad perspective on how trustees effectively define the goals of the pension fund, set policy, organize the investment process, and monitor and adjust choices in order to adapt to any changing circumstances.

This chapter discusses different types of investment management organizations, ranging from fully outsourced to fully insourced. We discuss implementation issues regarding the investment organization that currently dominate an industry‐wide debate among trustees. “Alignment of interests” is such an example of a highly debated issue, because the interaction between the investment committee (representing the interest of the fund) and the investment management organization is regarded as probably the most important factor in creating investment success.

This chapter takes a strategic perspective to the investment management process and identifies five investment approaches models that currently dominate the pension fund industry worldwide. Boards may not necessarily be aware of this, but usually they have been given the advice to incorporate one of these main investment approaches. Its adoption includes a predefined set of assumptions, means of implementation, and requirements for governance. This chapter therefore integrates the insights of the previous chapters and illustrates the five dominant models by looking at their fundamentally different choices in: a) mission, goals and beliefs; b) the investment process; and c) the investment organization. We identify the prerequisites, criteria and challenges that trustees would have to address when adopting one of those models.

Implementation is the process that puts the pension fund's plans and strategies into action in order to achieve its goals and objectives. This chapter takes a closer look at how the fund's strategic plan should address the essential aspects of implementation that will ultimately determine the success (or failure) of an investment strategy. We discuss how resources need to be assessed effectively and how objectives need to be quantified on a more granular level, in order to combine these into a flexible plan. Moreover, the plan should also explain how the fund intends to diversify across opportunities and how it aims to manage the risk of failure in meeting minimum required returns (determined by way of scenario analysis in relation to the fund's defined risk appetite). As risk management forms such an integral and essential part of the entire implementation of the investment process, this chapter considers the most important factors affecting implementation.