A Recipe for SWF Success…from Ontario

Ashby Monk

I’ve spent the past few days going back through all the investment governance literature for a new paper I’m writing on the independence of pension reserve funds and their investment decision making. Yes, I have read nearly all of these papers before, but I often find the process of going back through all the seminal papers quite useful. I typically find some new takeaway from an existing paper; come up with some new inspiration; or, as was the case yesterday, come across a valuable paper that I hadn’t previously discovered.

This paper by Claude Lamoureaux in the Rotman International Journal of Pension Management is new to me, and it’s actually quite cool. Lamoureaux offers a first-hand account of the challenges he faced while he was President and Chief Executive Officer of Ontario Teachers’ Pension Plan from its inception in 1990 to his retirement in 2007. Entitled, “Effective Pension Governance: The Ontario Teachers’ Story”, it links good governance with the success of the Ontario Teachers’ Pension Plan (OTPP). So, naturally, I think it’s awesome.

The paper is free to download, so I won’t rehash the entire history of OTPP here. However, it’s worth highlighting Lamoureaux’s “secrets to success”, as the OTPP was one of the first public institutional investors to aggressively move assets in-house. (…It has over 700 employees today…) So, the OTPP’s experiences are significant to the many SWFs that are also looking to insource assets. In large part, the OTPP case illustrates the complex nature of internal asset management.

Indeed, while I do think there are certain asset classes that really work in-house (e.g. infrastructure), I typically caution SWFs from rushing into this type of program. Put simply, while funds may save some cash in the short-term, in-sourcing is no panacea. It may resolve some of the agency issues associated with external mandates, but it also creates a new set of challenges for institutions. As such, the following “secrets” are quite valuable. And while they may seem obvious, actually getting the ingredients right in this recipe for success is a big challenge:

2 Responses to “A Recipe for SWF Success…from Ontario”


  1. 1 Megan November 24, 2010 at 6:49 pm

    Can you share the list of seminal papers?

    • 2 Ashby Monk November 24, 2010 at 7:31 pm

      Hi Megan,

      Thanks for your comment. Here’s an undoubtedly incomplete list of some of the great work on ‘investment governance’.

      Ambachtsheer, K., R. Capelle, and H. Lum (2009). “The Pension Governance Deficit: Still With Us”. Rotman International Journal Pension Management Vol. 1 (1): 14-21.

      Ang, A., W. N. Goetzmann, and S. M. Schaefer (2009). “Evaluation of Active Management of the Norwegian Government Pension Fund – Global,” report to the Norwegian Ministry of Finance. Available online: http://www.regjeringen.no/upload/FIN/Statens%20pensjonsfond/rapporter/AGS%20Report.pdf

      Carmichael, Jeffrey and Robert Palacios (2003). “A Framework for Public Pension Fund Management.” Paper presented to and Public Pension Fund Management Conference, World Bank, Washington DC, May 507, 2003.

      Clapman P. ( 2007). Committee on Fund Governance: best practice principles”. The Stanford Institutional Investors’ Forum, Stanford, CA.

      Clark and Urwin (2009) Innovative models of pension fund governance in the context of the global financial crisis.

      Clark, G. and R. Urwin (2008) Best-practice pension fund governance. Journal of Asset Management.

      Clark, G. and R. Urwin (2008) Making Pension Boards Work: The Critical Role of Leadership. Rotman International Journal of Pension Management

      Clark, Gordon L. (2004). “Pension Fund Governance: Expertise and Organizational Form”. Journal of Pension Economics and Finance. 3(2): 233-253.

      Hess, David and Gregario Impavido (2003). “Governance of Public Pension Funds: Lessons from Corporate Governance and International Evidence.” World Bank Policy Research Working Paper. #3110.

      Iglesias, A and R. J. Palacios (2000) Managing Public Pension Reserves Part I: Evidence from the International Experience

      Iglesias, Augusto and Robert. J. Palacios (2000). “Managing Public Pension Reserves. Part 1: Evidence from the International Experience”. Social Protection Discussion Paper Series. No. 0003.

      Jermo, J. (2008) Governance and Investment of Public Pension Reserve Funds in Selected OECD Countries

      Kaplan M. L. and S. L. Zelermyer (1999). “Conflict of interest: An analysis of the President’s social security proposal.” PP 109, National Taxpayers Union Foundation Papers: http://www.ntu.org/main/pressreleaseprintable.php?PressID=316&org name=ntu

      Leibowitz M L (2005) “Alpha hunters and beta grazers”. Financial Analysts Journal Vol. 61: 32-39.

      McCulloch, Brian and Hane Frances (2003). “Governance of Public Pension Funds: New Zealand Superannuation Fund.” Pension Reform Primer.

      Munnell, Alicia. H. and Steven. A. Sass (2006). Social Security and the Stock Market. W,E, Upjohn Institute for Employment Research, Kalamazoo, MI.

      Palacios, Robert J. 2002. “Managing Public Pension Reserves Part II: Lessons from Five Recent OECD Initiatives.” Social Protection Discussion Paper 219. Washington, D.C.: World Bank.

      Romano R. (1993). “Public pension fund activism in corporate governance reconsidered”. Columbia Law Review 93: 795-853

      Stewart, F and J Yermo (2008) Pension Fund Governance CHALLENGES AND POTENTIAL SOLUTIONS. OECD.

      The CFA Institute, 2007, “Code of conduct for members of a pension scheme governing body”, Chartered Financial Analyst Institute Centre for Financial Market Integrity, http://www.cfainstitute.org/centre/codes/pension/pdf/pension codedraft.pdf

      Useem M. and O. S. Mitchell (2000). “Holders of the purse strings: governance and performance of public retirement systems”. Social Science Quarterly. Vol. 81: 489 506

      Yermo, Juan (2008). “Governance and Investment of Public Pension Reserve Funds in Selected OECD Countries”. Financial Markets Trends. ISSN 1995-28634: 133-161.


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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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