I provide an account of the introduction of performance measurement of UK defined benefit occupational pension funds and their investment managers, following the development of money-weighted and time-weighted measures of portfolio performance, during the 1970s. The adoption of portfolio performance measurement followed the establishment in 1970 of a financial accounting standard setting body, the Accounting Standards Steering Committee (ASSC). Initially an ambitious standard setter, the ASSC tried and failed to promulgate a solvency-based pension fund financial accounting standard. In this view the introduction of performance measurement was a compromise necessary to achieve an approach to pension fund governance consistent with the development of modern portfolio theory and resolution of debates relating to the responsibilities relating to corporate governance of institutional investors.
I draw upon three sources of data. First, technical texts include accounting standards, actuarial guidance notes, reports relating to performance measurement and articles published in professional journals and related press regarding the standard setting process. Second, archival data consisted of council and committee minutes gathered from eight professional associations representing constituencies exercising influence over the setting of pension fund financial accounting standards and determination of actuarial and investment practices. Third, semi-structured interviews were used to capture the history of the introduction of performance ranking of pension funds investment managers from the participants who were professionally active during the 1970s and closely involved in the development of the process. Respondents included trustees, pension managers, consulting actuaries, investment consultants, fund managers and stockbrokers.
This paper contributes to our understanding of the relationship between the standard setting processes and the professionalisation of investment management in the 1970s. The paper extends an account of the organization of occupational pension funds as responding to the setting of standards relating to governance in the 1950s.