Investment Strategy

Calculations show that for a lifelong member about 75% of the benefit he/she receives are investment returns with the balance being contributions. This means that the Fund's investment strategy has a major impact on the ultimate benefits of the Fund.

The Fund's investment strategy is detailed in its Statement of Investment Principles. The following is a summary of the:

Investment philosophy

The primary investment philosophy of the Fund is to act like an investor and not a speculator. This means that the Fund will adopt a long term investment horizon in measuring the success of the investment strategy (i.e. a period of at least 10 years or more) and will not be deflected by short term price fluctuations.

A good example of how members behave like investors (and speculators) is their investment in their house. Firstly you would look to buy a house at a good price, thereafter:

  • You will be reasonably confident that you have made a good long term investment and would not bother to determine on a daily basis the price at which you could sell your house (unless you were speculating in property).
  • The sentiment in the property market is irrelevant to you until you start thinking about selling your house

As an investor (and not a speculator), you should apply the same logic to your retirement fund investment as you do to investing in your house - short term fluctuations in prices are irrelevant provided that you will be investing for a long time still.

Over the long term the Fund aims to deliver a suitably higher return than inflation, as ultimately it is this return that determines whether members will be able to retire with a reasonable retirement benefit.

This philosophy means that the Trustees will give little consideration as to how the Fund performs compared to other retirement funds over short measurement periods (e.g. less than 5 years). Over longer investment periods (5 years plus), the Fund will compare its return to that of other retirement funds to ensure that its returns are competitive.

In the defined contribution section this philosophy and approach is varied for members close to retirement age. Such members have a short to medium term investment horizon and greater emphasis is placed on protecting the member's retirement capital.

Investment objectives

In the defined contribution section a separate investment objective is derived for:

  • Defined contribution members some way off retirement
  • Defined contribution members close to retirement
  • Defined contribution pensioners

For each stakeholder the investment objective is designed to achieve that level of return required to provide reasonable and competitive benefits, whilst minimising the risk of poor outcomes over the long term.

Portfolio construction

The Trustees have adopted the following principles in relation to portfolio construction:

  • The Trustees have derived a strategic asset allocation (i.e. the mix of South African and international equities, bonds and cash) that optimises the chances of the Fund being able to achieve its investment objectives for each class of membership. The Fund will re-balance to this strategic asset allocation using pre-defined rules (i.e. no tactical asset allocation will be done).
  • The Fund will use specialist managers for each asset class.
  • The Fund will employ active managers for each asset class. By appointing active managers the Fund believes that it is possible to find skilful managers that can beat the relevant index over a long enough measurement period.
  • For the global and South African equity asset class about 65% of the assets will be managed by investment managers that adopt a long term contrarian investment approach - the so-called "valuation managers".
  • The assets backing the Fund’s DC pensioner liabilities will be invested in such a way that the projected future pension instalments for the next 8 to 12 years are matched by suitable inflation linked assets, while the remainder of the DC pensioner assets are invested to provide for the “tail” of the projected pensioner cashflows (beyond the “matched” period of 8 to 12 years) taking account of the long-term nature of these “tail” liabilities together with the desirability of providing good inflation-related increases on pensions paid after the “matched” period.

More about valuation managers

Valuation managers do two things differently than most other managers, namely:

  • They invest with a long term investment horizon (which is consistent with the philosophy of the Fund); and
  • They focus on buying very good, but out of favour shares, which they can buy at cheap prices relative to the true worth of the Company.

In this way they are contrarians.

This investment approach that was developed in the early 1930's by Ben Graham and is the approach that has the best track record by far of delivering superior investment returns. Warren Buffett, the world's most successful investment manager was a student of Ben Graham and applies the Graham approach to investment.

This approach takes the view that market sentiment and human behaviour result in the price of companies deviating from their long term intrinsic value. Another way of looking at this is that the intrinsic value of a business generally changes more slowly than its price.

This means that from time to time some Companies become very cheap relative to their true value and sometimes they become very expensive. The cheap companies (but still good companies) are often those that have fallen out of favour with the market temporarily and these are the shares the valuation manager will buy.

The expensive companies (which may also be good companies) are those that are in fashion and strongly liked by the market, but the valuation manager will not buy these shares because he assesses them to be too expensive.

Whilst this "buying bargains" is a sensible strategy, the difficulty is that excessive market sentiment may result in such managers under-performing the index significantly, especially over short measurement periods (i.e. periods of less than 5 years). For this reason, about 35% of the SA and global equities are invested with managers that will track the share market index more closely (so-called market managers).

The Fund's valuation managers for SA equities are Allan Gray Limited and Investec Value. For global equities the Fund's valuation managers are Brandes Investment Partners, Contrarius Investment Management and Veritas Asset Management.

The Fund's market managers for SA equities are Coronation Asset Management and Afena Capital. The Fund does not currently have a market manager for global equities.

Investment Managers

The Fund's investment managers are:

Allan Gray Limited

Allan Gray Limited is the largest privately held asset management firm in South Africa. They have an excellent long term track record for SA equities.

Allan Gray is a strong believer in the investment approach advocated by Ben Graham.

Investec Asset Management

Investec have a pocket of excellence within its SA equity asset class where John Biccard runs a portfolio according to the Ben Graham long term contrarian approach.

Investec have agreed to limit the amount of money managed by John Biccard to a relatively small amount and this small size means that the maximum number of "bargain" opportunities are available to the manager.

Investec also have an excellent SA bond team and an outstanding long term track record. The bond team works closely with the Investec global bond team, giving it a good understanding of international bond market trends.

Coronation Asset Management

Coronation Asset Management also has a very good long term track record for the SA equity asset class. Their investment approach is to take "bets" away from the benchmark and will change their investment approach depending on market conditions. Coronation is a more market orientated investment manager.

Prescient Investment Management

Prescient Investment Management have a very good track record for the SA bond and cash asset class.


The Stable Portfolio is currently invested in the Momentum (previously called Metropolitan Life) Multi-Manager Smooth Growth Fund. Momentum / Metropolitan has a good track record for this product over longer measurement periods.

Brandes Investment Partners

Brandes was founded in 1974 and subscribes strongly to the Ben Graham approach and the founder of the business. Charles Brandes was also a student of Ben Graham. Brandes manages about US $30 billion of equities and is privately owned.

Veritas Asset Management

Veritas were appointed in 2011. Veritas is an independent, employee-owned investment firm.  The firm has a strong, investment-led culture focusing on long-term thinking with a thematic approach and non-benchmark oriented investing. 

Veritas is also a smaller asset manager (assets under management US $10 billion) focussing on mid size and large capitalisation companies.

Contrarius Investment Management

Contrarius were also appointed in 2011. Contrarius is a relatively new investment company with the company only being started in 2008. However, its founder, Stephan Mildenhall, was previously a very successful fund manager with Allan Gray over an extended period of time. We rate Mr Mildenhall very highly and we believe that Contrarius has almost all the elements that make for a successful investment firm.


The registered rules of the Fund contain everything you need to know about your Fund, its Governance, Management, Investments and Benefits. The Fund is bound by the Rules of the Fund. In the event of a dispute between any information provided and the Rules of the Fund, the rules will apply.

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