Issue: December 08/February 09
Four questions you should ask about your retirement fund assets right now
Executive General Manager
Old Mutual Corporate
South Africans are facing what could prove to be the most difficult investment conditions in many years with disposable incomes under pressure, highly uncertain local and global political and economic conditions and significant financial market volatility.
This has left many retirement fund trustees and members with questions as to how to protect their pension fund assets. Seelan Gobalsamy, Executive General Manager at Old Mutual Corporate, one of South Africa’s leading providers of pension fund solutions, answers some of these questions.
Q1 What’s the outlook for the rest of 2008?
Peter Brooke, head of Macro Strategy Investments at Old Mutual Investment Group SA, has been cautioning investors for some time now to temper their return expectations from equities following the phenomenal bull run of the last four years. In the long run equities remain his favourite asset class, however in the short term markets are typically volatile and the uncertain global economic outlook will keep equities volatile.
For the short term Peter has positioned the funds he manages defensively to deal with the uncertain environment by increasing cash levels and reducing equity holdings. With a focus on asset allocation, the Macro Strategy boutique is well-placed to benefit from market volatility, which can and often does present opportunities to purchase non-cash assets at attractive valuations.
Q2 Should retirement fund trustees and members be reviewing the investment strategy and options underlying their fund, given the current market conditions?
Retirement fund trustees are obligated to seek investment vehicles that meet the needs of the general membership and generate favourable returns on retirement savings without exposure to excessive risk. Current market conditions however are presenting significant volatility risk, with erratic returns being witnessed.
For individual members, this depends on their risk appetite and investment time horizon. For members close to retirement, exposure to current market volatility is a significant risk, which could adversely affect their retirement savings.
On the other hand, members who are far from retirement may well be content to ride out this period of volatility and falling markets. Even with a high exposure to local and global equity markets, investments are expected to continue to generate more favourable returns in the medium- to long-term, with retirement savings recovering to favourable levels.
Q3 Is there a way to reduce the exposure to this volatility but still get competitive returns
Old Mutual Corporate offers a range of guaranteed investment products that offer different forms of protection to reduce the risk of the effect of volatile or falling markets on members’ retirement savings. These products (such as the Old Mutual Guaranteed Fund, CoreGrowth and the new Old Mutual Absolute Growth Portfolios) are specifically designed to reduce the volatility in returns by, in times of climbing markets, not declaring all returns earned but retaining some in reserve to enable these products to declare more favourable returns while markets are declining or volatile.
GF bonus declaration continuing with its successful long-term track record, the Old Mutual guaranteed fund recently declared a 13% bonus for the year 30 June 2008.
Q4 Where can I find out more information about all these issues and available products?
You can find out more about the guaranteed investment portfolios in Old Mutual Corporate’s range of Growth and Protection Solutions by contacting your Old Mutual Corporate Consultant, your broker, or Roy Singh Executive General Manager of Old Mutual Corporate, tel: 021 509 0484 or email firstname.lastname@example.org You can also email Investment Services at: email@example.com