CFA Institute

Pension Fund Investment ManagementReview by: Robert I. CumminFinancial Analysts Journal, Vol. 26, No. 3 (May - Jun., 1970), p. 126Published by: CFA InstituteStable URL: http://www.jstor.org/stable/4470692 .

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inflation." Hopefully, as a result of Dr. Bums tutelage, this failing, at least in the area of monetary policy, will be overcome.

PENSION FUND INVESTMENT MAN-

AGEMENT, C.F.A. Mo.nograph Number 3, C.F.A. Research Foundation. Published by Rich- ard D. Irwin, Inc., Homewood, Illinois, 1969. 141 pages. Reviewed by ROBERT I. CUMMIN

Laidlaw & Co., Inc.

The latest C.F.A. Monograph, like Number 2, Personal Trust In- vestment Management, was made up from a C.F.A. research seminar of experts in the field. It was moderated and edited by Esmond B. Gardner, the retired head of the Chase Man- hattan pension trust division, and now the first C.F.A. Research Fel- low. The panel was understandably dominated by bankers but also in- cluded the manager of a self-admin- istered corporate pension fund, the manager of a State Fund, an invest- ment advisor, and an actuary. The format, exasperating to me, is again a revolving discussion, wherein the identity of the participants, except for the moderator, is concealed by randomly shifting pseudonyms. The discussion follows a logical outline, being divided into:

1) The Trust Agreement 2) Funding a Pension Plan 3) Investing the Pension Fund 4) Measuring Investment

Performance 5) Ethics

There is also a useful bibliogra- phy. Mr. Gardner's role as mod- erator is an outstanding feature, and the editing is at least as competent as that of the pioneering Personal Trust Investment Management.

The result is a distinguished con- tribution to the practical side of managing trusteed pension funds. The monograph will be useful to

everyone concerned with pensions and p.ension management. Those whose main interest is in other forms of investment management and anal- ysis will also benefit.

Pension Fund Investment Man- agement is, of course, not a com- plete guide to the subject. Its impor- tance is that it identifies so many of the problems that must be resolved before the investment manager will be free to confine himself to achiev- ing optimum investment results for his funds.

For instance, there remain serious legal uncertainties about the rela- tionship of the corporation and the trustee, the doctrine that each in- vestment must stand on its own feet instead of being merged with the whole result, and the consequences of a trustee assuming risk. While a brief such as William Cary prepared for the Ford Foundation's study of endowment funds would be useful, there is a need for new legal prece- dents and possibly new legislation.

The concept of total investment return is understood differently by managers and actuaries.

The concept of the pension trust as a corporate profit center appears to require a change in the relation- ship between the trustee and the corporation.

The identification of risk with price volatility, beloved of the acad- emician because volatility can be measured, seems dangerously inade- quate. True risk is the probability that investment assumptions will be realized and is virtually impossible to assess accurately. Nevertheless, in judging performance, we would like to know how much is skill and how much luck.

The ethical problems are mainly concerned with the relationship of the pension trust to other banking activities. In matters of possible self- dealing they are often more governed by legal restraints than by principles of fair dealing.

These and other pension prob- lems will be debated for a long time to come. The C. F. A. Research Foundation is to be congratulated for giving the debate such an aus- picious start.

THE MONEY MANAGERS. Edited by Gilbert Kaplan and Chris Welles. Introduction by 'Adam Smith'. Random House, New York, 1969. 261 pages, $6.95.

Reviewed by PHILIP M. HAHN

United States Trust Company of New York

This important summary of The Institutional Investor's series on money management and perform- ance investment is more than a re- print of selected articles. It repre- sents the editors' serious efforts to summarize and synthesize all the work they and their subject man-

437th Dividend

Pullman Incorporated

Quarterly Cash Dividends Consecutively Paid

For 102 Years

A quarterly dividend of sev- enty cents (700) a share will be paid on June 12, 1970, to stockholders of record May 15, 1970.

W. IRVING OSBORNE, JR. Chairman and President

Divisions Transportation Equipment Pullman-Standard Trailmobile Transport Leasing Engineering/Construction The M. W. Kellogg Company Swindell-Dressler Company

Principal Subsidiaries The Canadian Kellogg

Company, Limited Kellogg International Corp. Trailmobile Finance Company Canadian Trailmobile Limited Empresas Tecnicas Asociadas

Pullman, S.A. (Mexico) Unimation, Inc. Berry Metal Company Aloe Coal Company

126 FINANCIAL ANALYSTS JOURNAL / MAY-JUNE 1970

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