Peer Intelligence | Fall 2022

By Edsart Heuberger

Transparency and effective communication are two critically important success factors for pension funds. Together they build trust, improve strategic focus and stakeholder relationships, increase engagement with plan members and employees, and drive better member outcomes.

In 2021, CEM introduced a Global Pension Transparency Benchmark in collaboration with top1000funds.com. The Transparency Benchmark rates the public disclosures of the five largest pension fund organizations in fifteen countries.
CEMers spent 2,500 hours assessing the quality of public disclosures.

Each review focused on four themes: cost, performance, responsible investing, and governance. This month, we feature a cost reporting best practice from the organization that was rated the most transparent in the world: Canada Pension Plan Investment Board (CPP Investments).

CPP Investments uses text and illustrations in their annual report (shown below) to convey a great deal of important information about their investment costs. There are a few things we liked:

Figure 1: Investment Costs as a Percent of Total

Major costs are disclosed separately. It is best practice to report operating expenses, management fees, performance fees and transaction costs in public disclosures. CPP Investments shows more detail: taxes and leverage-related expenses are included, and operating expenses are broken out into personnel expenses and general and administrative expenses.

Figure 2: Investment Costs by Category

Costs are shown in absolute dollar amounts, in accordance with International Financial Reporting Standards. CPP Investments voluntary discloses supplementary detail. Relevant contextual information is provided via footnotes.

Figure 3: Rationale for Incurring the Costs

CPP Investments includes an explanation of what costs they pay for and their reasons for incurring the costs.

CPP Investments’ cost reporting is best-in-class because their reporting is timely, complete, and easy to find and understand.

CEM’s Transparency Benchmarking Subscription features many more performance, cost, responsible investing, and governance reporting best practices. To learn more click here.