The results of the Mercer 2014 Superannuation Governance Survey showed trustee boards lacked confidence in making short-term tactical investment decisions and in terms of selecting or replacing investment managers.
Mercer said trustee boards should be relying on their asset consultants or investment committees to make recommendations or even make decisions under delegated authority given the timeframes within which action may need to be taken.
“However, trustee directors must still be able to understand the recommendations and decisions and the reasons behind them to effectively monitor their agents and delegates,” said Mercer.
The survey revealed an “alarming picture on the pace of decision making”, according to Mercer, particularly in regard to asset allocation.
The results showed that while 18 of out of the 33 respondents took either less than a month or between one and three months, eight funds said such decisions took from three to six months, while one said it took between six months and a year.
Mercer said a pace this slow “highlights potential problems in the decision-making structure, with either the wrong people making the decisions or those charged with the decisions not being empowered to get expert help to assist”.
“Consider a situation where an asset allocation opportunity has been identified. For example, one particular asset class is showing signs of being undervalued,” said Mercer.
“Our experience is that if an organisation is taking six months or more to make this kind of decision then there is significant potential for the opportunity to be lost.”
