Investment Policy Statement
With the input from the Fund’s Actuary, the Board of Nehawu National Provident Fund have determined and established the following primary investment objective for the fund:
• To earn a net real Rand investment return of at least 4.5 percent per annum – in other words, to earn at least an annual return of 4.5 percent after inflation (as measured by the South African Consumer Price Index), applicable taxes, and investment fees and costs. A long-term investment time horizon is applied.
The assets in which the Fund invests have long-term performance and characteristics which should enable the Fund to deliver investment returns consistent with the Fund’s investment objective. The resulting allocation to various classes of assets is known as the Fund’s strategic asset allocation.
The Fund’s investments consist of SA Equities (Shares), SA Listed Property, SA Bonds, SA money market (Cash), SA Alternative Assets and International (off-shore) investments. Investments are selected not only to achieve both the matching of the Fund liabilities, and optimal returns. The Fund uses external asset managers to invest the portfolio in order to improve diversification and enhance investment returns.
The external domestic (RSA) asset managers are:
• Kagiso Asset Management (Proprietary) Limited for SA Equities
• Old Mutual Investment Group (South Africa (Proprietary) Limited Ideas Fund for SA Alternative Assets
• Sanlam Investment Management (Propriety) Limited; for SA Equities
• Futuregrowth for both SA Bonds and Money Market
The international asset managers are:
• Novare Actuaries and Consultants
Investment Philosophy & Arrangements
• The Fund implements its investment strategy largely through specialist Asset Managers, each specialist manager managing an asset in which they are specializing on. The International Portfolio is a balanced portfolio.
• Value is further added through investment activities performed by the Asset Consultant, currently Novare Actuaries and Consultants.
• The Fund has adopted a Core-Satellite Approach to its investment structure. The Core investments will aim to reduce risk. The satellite will consist of specialist local and international active managers to generate alpha or out performance of the benchmark Passive and Active Portfolio Management. The former is costly, hence the latter is used to ensure that the expected value added is not cancelled out by costs; Pooled Investment Vehicles. In the pooled vehicle the assets from different managers are combined in one portfolio with the aim of reducing management fees. Segregated Investment Vehicles in which only the assets of the Fund are managed, and the Fund is able to give the asset manager a specific mandate for the portfolio, are costly hence the Fund do not use them; Single Manager for each asset class and not a Multi Manager whose responsibility is to select, monitor and replacing underlying asset managers when necessary.
• The strategic asset allocation is reviewed by the Investment Committee and approved by the Board of Trustees, after considering the advice and/or recommendations by the Asset Consultant.