Martin Palmer, head of corporate pensions marketing, Friends Provident, says that corporate investment platforms can play a major part in the shift to increase accountability

The recent financial crisis has had many effects. One of them is that financial systems and services are in the public eye like never before. Quantitative easing. Collateralised debt obligations (CDOs). Bankers' bonuses. And tying these all together is one clear theme: an ever-increasing call for greater accountability.

Pension schemes have felt the brunt of some of this. Institutional investors have been accused of not doing enough and causing or at least exacerbating the crisis. But can institutional investors be held responsible for the failure to hold financial institutions to account?

Direct investment by pensions schemes is almost a thing of the past, as the National Association of Pension Funds (NAPF) recently pointed out. As a result, the NAPF has just issued new guidance for trustees on how to manage their investment managers.

Power
Nevertheless, pension schemes are big institutional investors, potentially giving them a lot of power. Though in practice much of this is exerted by fund managers, investments are also crucial to pensions schemes' success - and in the case of trust-based schemes the investment of assets is firmly the responsibility of trustees.

To ensure successful investment of assets, it really does make sense to look at technology in general and corporate investment platforms in particular. Corporate investment platforms use a single administrative platform to provide trustees with the ability to access a comprehensive range of investment managers, fund and styles. They allow the creation of bespoke blended funds and automate the trading and management of underlying funds, improving reliability and certainty of transactions. These platforms can therefore help with governance issues due to the fact that the platform automatically generates management information.

This should provide improved transparency for trustees.

Minimise risk
The technology also helps to minimize the risk involved in investing. Start with the supposedly simple task of fund administration. We all know that manual error is a risk, so straight-through processing - a core feature of the platform - is an obvious alternative. From the governance perspective, this helps trustees carry out the fiduciary duty of ensuring that everyday fund administrative procedures are effective.
But there's also a cost benefit: it saves money.

Administration is further simplified because the platform enables the blending of selected underlying funds into a forward priced single fund. Automatic and manual rebalancing options ensure that once an investment strategy is set, it is followed. Again, this means clarity for the trustees and confidence that their plans are being adhered to.

The result is that investment strategies can be more flexible - allowing a wider range of fund managers as well as the flexibility to build bespoke fund of funds and blended fund options. Blended funds provide the ability to change fund managers with ease and are widely seen as the way forward in meeting the investment needs of pension scheme members by optimizing investment strategies with different styles, asset classes and risk profiles.

There's a bigger issue too that can be mitigated through platform technology: the 'out of market' risk. Put simply, this refers to the fact that during any routine transfer of funds, investors' money is outside the markets. The longer that transfer takes, the longer your money is doing nothing. Given that fund transfer normally occurs when investors have identified an opportunity, any delay could lead to missing out on a big gain.

With the platform, that delay is greatly minimised. Similarly, dealing cycles and settlement processes are homogenized, making it easier to move funds. Alongside all this, management tools provide the trustee board with greater transparency and thus confidence in the system. Better fund reporting and performance management give trustees a holistic overview of performance.

So whether they're overseeing a defined benefit or defined contribution scheme, they are better equipped to meet the ever increasing demands and duties without stretching their resources too far.

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