Investment Governance for Trustees: Regulation 28, King V, and the Question You Will Be Asked

The asset manager’s presentation was polished. Twenty-eight slides, three-year returns above benchmark, a confident closing line about riding out the volatility. The trustees nodded. One asked about fees. Nobody asked about the coal exposure sitting in the growth portfolio, or whether the climate risk in it had ever been assessed against the fund’s thirty-year horizon. The mandate was signed off in eleven minutes. Two years later, a stranded-asset write-down took four percent off the portfolio, and a member representative asked the board a simple question: did you know this was there? The honest answer was no. That gap - between what a board signs off and what a board actually understands - is where investment governance lives.

Regulation 28 as a prudential framework

Regulation 28 does not exist on its own. It draws its authority from section 36(1) of the Pension Funds Act, and it is gazetted as G.N. R183 in Gazette 34070. Think of it as the rulebook for how a fund may deploy retirement savings: it sets asset-class limits and diversification requirements governing how much of the fund may sit in equities, in property, in offshore assets, or in a single issuer. The purpose is prudence - no single exposure should be able to sink a member’s retirement. But here is the point trustees miss. Regulation 28 is not a tax calculation you hand to the actuary and forget. It is a statutory embodiment of responsible investment, and your role is oversight of compliance with that framework, not managing the portfolio yourself: knowing the limits the fund must respect, checking that the portfolio actually stays inside them, and asking for evidence rather than accepting assurances.

The preamble obligation

The most important sentence in Regulation 28 sits in its preamble, and most trustees have never read it. It requires that before making an investment, and while that investment is held, the fund must consider any factor that may materially affect the sustainable long-term performance of the asset - and it explicitly includes environmental, social and governance factors. Climate risk, the social licence of an investee company, the governance quality of the businesses your fund holds: these are not optional extras a progressive trustee might raise. They are inside the statutory duty. And notice the two words “and while”, because this is not a box ticked at purchase. It is a continuing obligation for as long as the fund holds the asset. The coal exposure in that opening scenario was a preamble failure long before it became a write-down.

King V Principle 3 and fund purpose

King V Principle 3 speaks to strategy, performance and sustainable value creation, and it starts with a question of purpose. A retirement fund does not exist to generate profit. It exists to deliver sustainable benefits to its stakeholders: members, beneficiaries and the people who depend on those benefits in retirement. That reframing changes how a board thinks about performance. If the purpose is a benefit paid decades from now, then trustees must evaluate the fund over the investment horizon of its stakeholders, not the quarterly cycle an asset manager reports against. A strong three-year number means little if the strategy behind it quietly compounds risk over thirty. King V, remember, is a code applied on an apply-and-explain basis, not legislation.

The investment policy statement

The board does not manage the portfolio, but it does own the mandate - and the document that bridges trustee oversight and asset-manager execution is the investment policy statement. This is the single most important governance instrument in fund investment. It translates the board’s intentions - its risk appetite, its return objectives, its Regulation 28 constraints and its responsible-investment expectations - into a mandate the asset manager is contractually bound to follow. A vague policy statement is a governance failure waiting to happen, because it gives the manager room to interpret and the board nothing firm to hold them to. A precise one lets trustees ask a real question at every review: are you doing what we mandated, or something you found more convenient?

Oversight of the asset manager

King V Principle 7 governs delegation, and it carries one unavoidable message: you can delegate the task, but you cannot delegate the accountability. When a board appoints an asset manager, oversight and liability stay with the trustees. Adequate and prudent oversight means more than reading a returns slide - it means testing whether performance was earned inside the mandate or outside it, whether risk was taken that the board never authorised, and whether the manager’s reporting is complete enough to answer that. It also means agreeing in advance what the board will be shown and how often, so that a thin quarterly slide can never again pass for genuine oversight. Investment management carries specific conflict-of-interest risks trustees must watch: pooled vehicles where your fund’s interests sit alongside others, valuation complexity in assets that do not trade openly, and fee allocation that can quietly favour the manager. This is precisely where independent trustees earn their place, asking the uncomfortable question the eleven-minute sign-off never reached.

ESG as a fiduciary obligation

There is still a myth that ESG is a values choice a board may take or leave. Regulation 28’s preamble settles that: ESG integration is a statutory obligation for retirement funds. It is not voluntary and it is not aspirational. The factors that matter are the ones that materially affect long-term performance - climate risk that can strand assets, a social licence that can collapse a business overnight, and the governance quality of the companies your fund owns. This is where CRISA 2 complements King V. As the voluntary responsible-investment code for institutional investors, CRISA 2 asks funds to advance long-term risk-adjusted returns, to promote sustainable value creation, and to align their service-provider arrangements and reporting lines with the fund’s sustainability objectives. None of this asks trustees to become sustainability specialists. It asks them to treat a material ESG risk exactly as they would treat any other threat to the money: by naming it, testing it, and recording what the board decided.

Reporting and accountability

Oversight that is never reported is oversight that cannot be tested. King V Principle 4 addresses reporting, and it connects directly to the FSCA’s statutory reporting requirements for funds. The board must be able to show - not merely assert - that it considered the material factors Regulation 28 requires, that it monitored its asset manager against the mandate, and that it acted where the investment policy statement was breached. Reporting is where the entire chain becomes visible: the preamble obligation, the King V alignment, the mandate, the oversight. When a member representative asks whether the board knew about an exposure, a fund with disciplined reporting can point to the meeting where it was raised.

The question you will be asked

Every trustee will one day sit across from someone whose retirement depends on a decision the board signed off. They will not ask about benchmark quartiles or asset-class limits. They will ask a version of the same question: did you know, and did you do something about it? Regulation 28 tells you what you were obliged to consider. King V tells you the standard you were held to. The investment policy statement is where your intentions became enforceable, and reporting is where your diligence became provable. Oversight is not the slide you nod at. It is the answer you will have ready when that question finally comes - and the work is making sure it is yes.