Summary of Investment Process
Coris Capital recently sold off its multi-asset manager department to Sanlam Multi Manager International (SMMI) but still make use of this team and the processes that were in place before. The service delivery is based on a total solution covering all aspects applicable to the fiduciary duties of Trustees as laid down by Regulation 28 of the Pensions Fund Act.
During the 1990’s companies in general moved from defined benefit (DB) pension schemes to the potentially more lucrative defined contribution (DC) pension schemes. This implies that all the investment risk moved to the pension fund member.
The investment process starts by firstly understanding the client. This implies an understanding of the profile of the Fund in terms of salary and age distribution and understanding all the applicable rules of the Fund. This information, in conjunction with reasonable and well researched assumptions, is used to create an artificial liability profile. This implies the calculation of real return requirements over different time horizons for individuals to retire at a certain benefit level of their final pensionable salary. This benefit allows members to receive monthly retirement benefits adjusted with a percentage of inflation for periods coinciding with the South African actuarial mortality tables.
This information is applied to determine the different investment channels offered to members. The investment channels differ in terms of their objectives and risk profiles and are applicable to different stages within the individuals' life cycle or circumstances. The different risk profiles of the investment channels imply different strategic (five years) and tactical (one to three years) asset allocation parameters. The tactical asset allocation strategy is based on short-term market valuations and is used to take advantage when relative valuations between asset classes are over or undervalued. The tactical asset allocation exposure will always fall within the parameters of the longer-term strategic asset allocation. These parameters are determined by the asset class expected return forecasts and correlations with calculations performed by sophisticated international optimisation software. The optimal blend of asset managers needs to be selected for every asset class.
The support and backup of the compliance department ensures that operations are within FSB regulations. Compliance also monitors the integrity of the back-office database and the back-office support systems of the asset managers. The solution for every client is contained in an Investment Policy Statement (IPS). This document is reviewed annually or whenever a permanent structural change occurs within the Fund, the client, regulatory environment or the market condition. The IPS is a dynamic document enabling Trustees to manage their fiduciary duties.
Investment process flow chart
