APRA Prudential Standards
Governance & Investment Governance
Mark Bland
Partner, Mills Oakley
Agenda
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Proposed SPS 510 Governance
Proposed SPS 530 Investment Governance
Investment Governance – case study
Getting your Governance in order
Key Challenges
Proposed SPS 510 - Governance
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Independence of directors
Independence of chair
Tenure and renewal policies
Board assessment processes
Use of board committees
Remuneration
Related SPSs: Conflicts of interest, Fitness and Propriety, Investment
Governance
Proposed SPS 530 - Investment
Governance
• Articulating clear investment objectives
• Formulating investment strategies
• Investment management processes for implementing investment
strategies
• Features of investment management
– Investment fees & costs
– Liquidity management
– Timely and independent valuation information
Related SPSs: Conflicts of Interest, Risk Management, Governance,
Outsourcing.
Investment Governance – case study
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Asset consultant recommends managed fund
Trustee invests through custodian
Exit fee – none at time of investment; 30 days notice required
Asset consultant applies heat to Fund Manager for poor performance
Fund Manager sends large document by email to Trustee investment
analyst including notice of 5% exit fee (not read)
Asset Consultant exit to Trustee board.
Trustee lodges redemption notice
Custodian lodges redemption notice
Fund Manager applies $8m exit fee and refuses withdrawal of
redemption notice
Investment Governance – case study (cont.)
Issues:
1. Outsourcing investment advice – asset consultant
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Outsourcing holding of investments – custodian
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What due diligence?
What responsibility?
What accountability & mechanism for recovery for loss?
What services are you paying them for?
Corporate actions
Disputes with service providers
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What accountability & mechanism for recovery for loss?
Investment Governance – new asset class
Getting your Governance in order
General
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Governance
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B.
Compliance and demonstrating compliance
Exhaustive implementation of “non-exhaustive” obligations
Do you need external review to perform an “independent and objective
assessment of [board] performance”?
Investment Governance
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Reviewing current investments (esp. MySuper)
My Super transition - planning prevents forced selling
Review outsourcing agreements against Fund governance processes
Valuation methodology for alternative asset classes
Adequate management reports to board (Centro)
Key challenges
• Adequacy of resources – internal / external
arrangements
• Adequacy of decision making processes to formulate
and implement strategy
• Transparency
Discussion