Changes to life-stage portfolios completed

IN SHORT: The life-stage portfolios have now all been moved to new, less volatile asset. This will affect certain members more than others, depending on their retirement plans and investment strategy. Please read the rest of this newsflash to see how you may be impacted.

As communicated in our previous Newsflash, the Fund wanted to ensure that the various life-stage portfolios were optimally structured to achieve their long-term investment objectives, but with the least possible volatility (investment market ups and downs). This is because volatility has a significant impact on members’ investment outcomes, especially for members with living annuities who have to make decisions about the draw-down rate of their monthly annuity payments on the anniversary of their annuity.

The Trustees therefore asked the Fund’s investment advisors to do a careful review of the life-stage portfolios and to recommend adjustments to the portfolios to reduce volatility, at the Fund’s July 2019 Investment Strategy Days. At this event, a staged implementation process was approved, and all portfolios were to see adjustments to reduce investment volatility over an eight-month period.

With the outbreak of the Covid-19 pandemic, investment markets became even more volatile and the implementation of these changes were held back. However, all changes to the life-stages have now been completed.

How this will affect you as member

If you are comfortable with and understand your journey through the life-stage cycle as you move towards retirement AND if you plan to select the guaranteed life annuity option at retirement, no further action is required from you.

HOWEVER…

• If you are within 5 years of retirement and are considering buying a living annuity at retirement, the default life-stage portfolio in which you are currently invested may not provide you with an optimal solution. You should consult a financial adviser to discuss whether it would be prudent to opt out of the life-stage default model in favour of a switch to a less conservative portfolio.

  OR

• If you have chosen a specific life-stage portfolio to achieve specific market exposure, the adjusted life-stage portfolio may no longer provide the equity market exposure that you expect. You should consult a financial adviser to discuss the changes to ensure that you gain the exposure you require.

More about the review process

During the July 2019 Investment Strategy Review Days, a full review of the Fund’s life-stage portfolios was undertaken to ensure that each life-stage portfolio is optimally structured to achieve its long-term investment objectives, but with the least volatility possible.

At the July 2020 Investment Strategy Days, further refinements to the Investment Strategy were approved for implementation, in conjunction with the alignment to the strategic asset allocation figures agreed previously. These were:

• The implementation of an Enhanced Income Building Block to enable further returns from cash assets;
• The implementation of a Hedge Fund Building Block to further reduce volatility;
• The transfer of offshore assets to passive Environmental, Social, and Governance (ESG) portfolios to improve returns at lower cost, while fully incorporating ESG considerations;
• The realignment of the Equity Building Block to revised asset manager allocations to optimise the style and performance expectations of the Building Block; and
• The realignment of the Bond Building Block to revised asset manager allocations to minimise the exposure to property during a period of strong and expected future underperformance.

More about the specific changes

The table below shows in more detail how the strategic asset allocations of the various life-stage portfolios have been adjusted.

If you have questions

If you have any questions or concerns regarding these changes, please call David Datnow on 053 807 3363 or Hemah Moodaley on 053 807 3504, or email pension.post@dbpf.co.za.

Kind regards

Stanley Mathonzi

PRINCIPAL OFFICER