9 1/2 QUESTIONS
An Interview with
Carlos Panksep
Managing Director of CEFEX
By Gabriel Potter, AIF®
I
In this issue, Carlos Panskep of CEFEX
talks to Confero about the benefits of
good stewardship.
As a term, “stewardship” can seem
like a vague, corporate buzzword that
lacks solid meaning. For the benefit
of our readers, how would you define
stewardship?
We have a fairly well-defined definition
of stewardship. We specifically go into the
investment stewardship aspect as opposed
to the broader definition of stewardship.
We define an investment steward as the
person who has the legal responsibility
for managing investment decisions, so that
would include the plan sponsors, trustees and
investment committee members. Typically,
the investment steward isn’t an investment
professional themselves, but they are
responsible for selecting and overseeing
the investment professionals to act as
the experts for a plan or foundation and
endowment or any other entity like that.
Hopefully, the principal who underlie their
role are those of loyalty and care, those
two principals provide the basis for the
trustworthy conduct of the stewards who
are entrusted with other people’s money.
For a eleemosynary – a foundation or
endowment – what is the key benefit of
good stewardship?
For a foundation or endowment, we think
the key benefit is that good investment
stewardship maximizes the return on the
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donated assets. So as a steward you are
responsible to ensure the donor’s assets, or
the investment of those assets, are maximized.
When the donor organization hands over the
funds, they place an enormous amount of
trust that the funds are going to be utilized
as prudently and effectively as possible. And
that starts with just the basic stewardship
of the funds: “Where do we put the funds
and how are they invested until they are
used.” And that could have a material effect
on the longevity of the foundation and its
need to continually get more funds. The
better the funds are used the less need to
continually get more assets. That is a key
benefit, the investment benefit.
For a defined benefit plan – like a pension –
what is the key benefit of good stewardship?
One key statistic for a defined benefit plan is
its funding level—stewards must maintain
the funding of a defined benefit plan so it can
meet its obligations in the long term. A key
benefit of good stewardship would be that
cost and investment decisions are managed.
In other words, if you have high costs or
imprudent investment decisions, that will
negatively affect the plan’s ability to meet
its future obligations and its liabilities. So,
a good steward of a defined benefit plan
is going to manage things like that—costs
and investment decisions—very carefully
so that the funding of the plan is maintained
at its highest possible level. A good steward
can’t necessarily change the liabilities, but
they can have a direct impact of how well
the plan is funded to meet those liabilities.
For a defined contribution plan – like a
401(k) –what is the key benefit of good
stewardship?
Well, in this case we are talking about a
plan naturally, where the participants are
making their own decisions. But what the
key benefit of good stewardship here would
be that that steward has established a very
good investment lineup, a selection of
investment decisions that the participant can
make that are prudent. What the outcome
here is that the participant can trust that the
steward has established an investment climate
which is going to be in their best interest
and that it’s provided at a reasonable cost
to them. It’s like the steward has taken the
first stop of doing the investment shopping
and making sure that everything in the
shopping basket is a good quality product
at a reasonable cost and prudently selected
so that the participant now has a universal
selection that are a good starting point. As
in the case of defined benefit plans, I think
the performances and costs again will have
a direct impact on the participants’ ultimate
retirement nest egg. So it’s equally important
to get those investment decisions made
prudently to start with.
There are some external standards for
stewardship. For example, charitable
donors can investigate foundations and
endowments on various sites like Charity
Navigator. This site shows how much a
donation will support a cause and how
much supports other costs (staffing,
fundraising, and so on). Furthermore,
it will give donors an accountability