Retirement Fund Portfolios – Low Equity
These mandates invest in a mix of local and foreign asset classes and are managed to comply with the prudential requirements of the South African Pension Funds Act (Regulation 28). They are conservative asset allocation portfolios, designed to reduce the volatility of investment returns by ensuring that exposure to shares (both local and foreign) do not exceed 40% of the portfolio. These portfolios are appropriate for funds with a time horizon not exceeding two years.
• To exceed the South African inflation rate by 3% per annum
• To limit the probability of loss in any one-year period
• Exposure to equities (shares) limited to 40% of portfolio at all times
• Additional restrictions in terms of Regulation 28 – the major restriction being that foreign assets are limited to 25% of portfolio at all times.
• Other minor restrictions apply.
When saving for retirement, certain circumstances may require additional conservatism. Examples include retirement members who are transitioning into lower risk portfolios or for members who are well into their retirement years. For these funds, a low equity portfolio that aims to achieve returns that maintain purchasing power while having a low probability of negative returns in any one year may be appropriate. The graph below reflects the rolling one-year actual returns achieved for clients since inception on 1 November 2007 vs the objective of CPI+3% per annum. In the early years of the strategy, the portfolio failed to achieve its return objective but most importantly clients never sustained a loss over any one year period – even at the height of the global financial crises that saw markets trough in March 2009.
Minimum segregated account size: Negotiable from R250 million
Alternative pooled fund: Nedgroup Investments Stable Fund unit trust
Historic Investment Returns
The investment return information reflected below is in respect of a composite of institutional mandates managed on a segregated basis.
* CPI + 3% per annum