U.S. Pension Fund Investments: Trends, Regulations and Corporate Governance International Pension Conference FIAP and the Chilean Pension Funds Administrations Association March 15, 2001

Pension Fund Investments: Current and Future Trends

Pension Fund Investments: Current and Future Trends ($ Billions)

Pension Fund Investments: Current Trends  For private sector plans, equities as a share of total assets have grown slightly to 46% of the total portfolio.  Bonds have decreased from 25% of total assets in 1985 to 12.8% in  Equities in public sector plans comprise 67% of assets, bonds equal 22%, and 8% of assets are in cash and other assets.

Pension Fund Investments: Future Trends  Effect of the US Stock Market  Company Stock in Pension Plans  “Social Investing”  Investment Responsibility: Employer v. Employee  Changes to Fiduciary Regulations

Corporate Governance  Structure of U.S. Pension Laws –Review of ERISA’s Rules for Fiduciary Duties and Conduct –Who Controls Plan Assets: Plan Trustee Named Fiduciary Investment Manager

Corporate Governance  The Directed Trustee Exception: –Plan may permit participants to be named fiduciaries who may direct plan trustee –Conditions for participants to direct plan trustee –Tendering of unallocated or non-voted stock

Corporate Governance  Investment Manager Exception –The fiduciary act of managing plan assets includes responsibility for voting of proxies –Investment manager cannot delegate duties so as to relieve itself of fiduciary responsibilities –Appointment and monitoring of investment manager

Corporate Governance  Issues Related to Corporate Governance in the U.S. –Inactivity of Plan Fiduciaries –Effect of “Class Action” Lawsuits

U.S. Pension Fund Investments: Trends, Regulations and Corporate Governance International Pension Conference FIAP and the Chilean Pension Funds Administrations Association March 15, 2001