Expertise combined with solid countervailing power leads to sound investment decisions.
The pension fund actively uses both internal and external investment expertise to achieve good investment results for its participants. The use of this expertise requires strong governance, in which the pension fund consequently strongly invests.
Engaged shareholdership promotes good governance and corporate responsibility.
Integration of ESG factors makes a positive contribution to the risk- return profile. ESG factors influence the investment risk and return of all asset categories, with good governance being a prerequisite for improving a company's performance on the E (environment) and S (social) factors. The fund considers its Socially Responsible Investment policy an important tool to express its social responsibility.
To generate returns, investment risks need to be taken consciously and unrewarded risks hedged where appropriate. The fund wants to take on investment risks consciously because it is (sufficiently) rewarded for doing so. For other risks, a choice is made whether the pension fund is willing to take the risk, and also the issue of whether the pension fund can afford this risk is also specifically considered. The costs of hedging are also included in this assessment.
The strategic asset allocation largely determines the return potential and risk profile of our investment portfolio. The distribution across the various return and risk sources is the most important decisive factor for the ultimate result to be achieved. The subsequent decisions in the investment process are derived from these strategic choices and may not override the strategic risk profile.
Diversification improves the risk-return profile of the investment portfolio, taking specifically into account the underlying sources of risk and return. Diversification improves the risk-return profile of the investment portfolio. The fund looks well beyond the naming of an investment to identify the ultimate sources of risk and return and to diversify its exposure.
The long term investment horizon allows short term risks, such as volatility and illiquidity, to be accepted in order to realise a higher return. The liabilities of the pension fund a long-term perspective. This enables the pension fund to invest with a long time horizon. That is why the pension fund is able to accept short-term risks in order to profit from them in the long run. In addition, a long-term perspective also offers the option of investing in illiquid investments. However, the pension fund is aware that not all obligations are long term.
Risk premiums vary over time and across markets, so informed implementation of dynamic policies adds value. The pension fund believes that the reward for accepting different types of risk varies. The pension fund can benefit from this by choosing more or less exposure to a certain risk type at certain times within the parameters of the strategic risk profile.
Not all markets are efficient at all times and this offers opportunities to add value through active management. The pension fund believes that it is possible to add value through active management. However, outperforming a benchmark is not easily done. In the choice for active management, the costs of finding the right managers, the additional costs of active management, the extra governance requirements and the risk of underperformance are also taken into account.
Investment risks have multiple dimensions that need to be considered from different angles and perspectives. The investment environment is complex, uncertain and volatile. Therefore, investment risks cannot be adequately described within a single model, methodology or quantification. This requires an assessment with multiple layers.
Additional costs are acceptable for generating additional returns and/or better risk management.
The fund specifically takes into account that, in the long run, costs can erode returns. Nevertheless, the fund is convinced that in some cases it is advisable to incur (additional) costs in order to achieve better (net) investment results and to better align the investment risks with its risk budget.