Benchmark proves scrutiny on disclosure drives transparency improvements

The progress of the best performing funds combined with the improved transparency of responsible investing and governance disclosures are driving funds to record heights according to the results of the 2024 Global Pension Transparency Benchmark.

The GPTB, a collaboration between Top1000funds.com and CEM Benchmarking, measures the transparency of disclosures across cost, governance, performance and responsible investment factors for 75 funds across 15 countries, with the aim of improving industry transparency.

The fourth edition of the GPTB reveals again that increased scrutiny on public disclosures is driving measurable transparency improvements.

In 2024, the average fund scored 63 out of 100, versus 60 last year, and 55 in 2022.

The 2024 results reveal that for the second year in a row the overall quality of pension fund disclosures jumped, with 69 per cent of funds making improvements in their scores on the back of 77 per cent of funds improving scores in 2023.

This year’s average country score on responsible investing was 67 out of 100, up from 59 in last year’s review, marking the biggest relative improvement of any of the four factors.

The average country score on governance was 74 out of a possible 100, an increase of three points on last year’s average score of 71.

Six funds scored a perfect 100 across a certain factor, with Norway’s SWF scoring 100 in all four and taking the top spot in the fund rankings for the second year in a row. [See Norway takes out top spot on transparency, with a perfect score]

In total there were 11 perfect scores across different funds and factors.

Edsart Heuberger, CEM Benchmarking’s product lead for transparency benchmarking, says it is heartening to see that the Global Pension Transparency Benchmark has driven organisations globally to improve transparency in the last four years.

“For leading funds, the GPTB methodology has become a roadmap for improving transparency,” he says.

“These funds have addressed the gaps in their score. Governance, as an example, is an area where funds typically own all the data that is required to achieve a score of 100 – they just need to disclose it. It has become a norm for more funds to disclose executive and board remediation, or to contrast actual board member competencies against desired competencies.”

Cost

Cost scores were based on 29 questions across three components common to all, plus eight questions focused on member services.

There are barriers to comparing fund costs across the globe. Differences in tax treatment, organisation/plan types, and accounting and regulatory standards mean that it is difficult to find common ground for assessment. Thus, the review is not meant to be a comprehensive review of all cost disclosure elements, as they vary from region to region and even from fund to fund. Rather, it is focused on the material areas common to most funds.

The average country cost factor score was 49, down slightly from last year’s review score of 51. Individual fund scores ranged from a low of four to a perfect 100.

Completeness of external management fees is the lowest-scoring cost component, followed by detailed asset-class cost disclosure.

As the dispersion in scores suggests, completeness of cost disclosures varied considerably. Quality ranged widely as well, though qualitative factors were out of scope. Disclosures were better when the pension fund (defined benefit or defined contribution) was a single-purpose entity rather than a silo of a larger organisation, such as a wealth management company or a government department.

The Netherlands continued to lead the way, with the highest country score of 89. The top three cost factor scores were held by The Netherlands, Canada and Australia. The primary distinguishing factor of these countries is a strict regulatory environment.

Governance

Organisations were scored based on 35 questions across four components. The average country score of 74 out of a possible 100 represented an increase of three from last year’s average score of 71.

The biggest Canadian public funds continued to be the leaders in governance disclosures, consistent with their reputation for excellent governance. Australia, Sweden, Denmark, and Finland improved scores significantly as they made changes to improve governance disclosures.

Last year’s review noted that governance scores were most closely correlated with the overall score and posited that as good governance produces positive results, it creates greater incentive (or perhaps less disincentive) to be transparent with stakeholders. There is evidence of a relationship between responsible investing and governance scores: good governance allows funds to move beyond simply managing assets and towards addressing wider environmental and social issues.

Performance

Performance scores were based on up to 44 questions across seven components common to all, and two (member services and funded status) that were only applicable for some organisations. The overall average score of 63 was down one from 64 last year, and the third highest scoring factor after governance and responsible investing. Individual fund scores ranged from 19 to 100.

Current-year disclosures were generally comprehensive at the total fund or investment option level. In contrast, reporting on longer time periods and asset class results were more often minimal or missing, although more funds were observed disclosing intermediate (that is, three to seven year) performance figures.

Components with the highest scores continued to include asset mix and portfolio composition, and risk policy and measures. Similarly, the lowest scores were seen for asset class returns, and value added and benchmark disclosures.

Canadian and American funds now lead the way, with an average country score of 89 for the performance factor.

Responsible investing

Funds were scored based on 48 questions across three major components. The average country score was 67 out of 100, up from 59 in last year’s review, once again marking the biggest relative improvement among any of the four factors. Improvements to disclosures were evident across all components and most countries.

RI continued to exhibit the widest dispersion of scores, reflecting that countries are at different stages of implementing RI within their investing framework. Average country scores ranged from 0 to 100.

Canada ranks in first place, with a score of 96. The Dutch and Swedish funds were not far behind, scoring 92 and 89 points respectively.  Both countries deomstrated improved disclosures over the past year. The Nordic countries – Sweden, Denmark, Finland, and Norway – as a region continued to do very well on RI, with all receiving scores above the overall average.

survey improvements

This year, the survey was updated with three goals in mind: removing or improving overly interpretativequestions; keeping the responsible investment survey current; and keeping cost disclosure requirements consistent with reporting best practice as set out by CEM’s Global Reporting Principles. The change in methodology hasn’t materially impacted fund or country rankings.

“The survey has become less interpretative, which is critical for this benchmarking exercise,” Heuberger says.

“The responsible investing survey was also changed to be more standard-agnostic, and therefore more flexible and likely to remain current. There are still steps to take to improve the survey further. We continue to look for ways to assess readability. Transparency also means information is easy to find.”