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INVESTMENT MANAGER OVERVIEW

Trustee Fiduciary Responsibility

In selecting an investment manager, pension plan trustees have the responsibility to ensure that the investment manager's experience, qualifications and investment approach are consistent with the plan's investment guidelines, and that the investment manager has the necessary qualifications in order to provide the services involved.

Even though a pension plan has hired an investment manager and the trustees have delegated their investment management responsibility to the investment manager, the trustees will continue to have the obligation to oversee the investment manager's performance and ensure that the investment manager is performing its duties properly.

It is important for pension plan trustees to understand the following points:

  • Trustees must act prudently in their decision to hire an investment manager and delegate investment authority to the investment manager in order to avoid retaining liability for the investment activities of the pension plan as directed by the investment manager;
  • Pension plans should have a well-defined investment strategy and carefully drafted investment guidelines to guide the investment manager in its activities; and
  • Trustees must carefully monitor what the investment manager is doing on a regular basis. For corporate, government, and Taft-Hartley pension plans that are governed by ERISA, hiring an investment manager who is also a QPAM (see QPAM Exemption Requirements) is critical to the proper delegation of these responsibilities, and ensures that the investment manager can effectively avoid the prohibited transaction restrictions that could otherwise hinder the development and implementation of a sound real estate investment policy.

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