| RETIREMENT FUND MEMBERSHIP MANUAL
INVESTMENT STRATEGY The CAPE PENINSULA UNIVERSITY OF TECHNOLOGY RETIREMENT FUND iis a defined contribution retirement fund. The long-term investment performance of a defined contribution retirement fund affects the size of your retirement benefits. The Trustees understand that a key area in which the Fund needs to succeed is to provide members with appropriate investment portfolios and to provide sufficient and appropriate information for members to make informed decisions. The starting point of any investment strategy is to define the purpose of the Fund. Put another way, the Trustees have tried to answer the question – “Why does the Fund exist?” The Trustees have answered this question as follows: “The Fund exists to target reasonable retirement benefits for members. A reasonable retirement benefit for an in-service member with 35 years of service at retirement and an average career progression is a capital sum of some 12 to 13 times pensionable salary at retirement. The Fund must also provide a reasonable (but appropriately limited) choice of investment vehicles to those members who require more control over their retirement fund investments and who prefer to take responsibility for their own investment decisions.” The reasonable retirement benefit is a target that cannot be guaranteed. The target is based on the assumptions that 19.408% of the member’s pensionable salary will be set aside as retirement savings, that the investments will earn at least 4.0% to 4.5% per annum in excess of inflation over the long term, and that the member will retire at age 65. The Fund’s investment strategy is detailed in its Investment Policy Statement. This section covers the following: • Investment philosophy the Trustees have adopted • Investment objectives for the portfolios • Investment Approach • Approach adopted by the Fund • How the Fund chose the investment managers
Disclaimers Investment is a complex area and every attempt has been made to simplify this for ease of understanding. This may result in some areas being covered in relatively little detail. Readers should note that: • Past investment performance is not necessarily a guide to future investment performance. The statistics shown in the guide are based on past performance; • The information contained in this guide does not constitute advice by either the Board of Trustees, nor its advisors; and • Members may need to seek expert financial advice before making an investment decision.
INVESTMENT PHILOSOPHY rimarily the Trustees have adopted a long-term time horizon in formulating the Fund’s investment strategy. This means that P the overall success of the strategy will be measured over periods of at least 7 years. • The main risks carried by members of the Fund are: - Inflation risk - this is the risk that the Fund does not earn a sufficient return to be able to provide a reasonable retirement benefit. The Fund will therefore measure its success by comparing its return relative to inflation over periods of 7 years. - Loss of capital - it is important that members are provided with an increasing degree of capital security for the 7-year period leading up to retirement age. • The Trustees have assumed that the most appropriate indicator of investment risk is the time to retirement of the member. Younger members are assumed to place priority on management of inflation risk and older members on protection against loss of capital close to retirement. • To this end the Fund has established 3 separate default portfolios. Younger members will be allocated a portfolio that has the potential to earn returns sufficiently higher than inflation to achieve a reasonable retirement benefit, and older members will be allocated a portfolio that offers a degree of capital protection close to retirement. • The Fund’s investments must be conducted in a manner that is honest, transparent and ethical. •
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