Financial mishaps in the asset management industry should remind trustees of the importance of risk reporting for their funds' portfolios, according to Steven Braudo, operations director of South African-based Investment Solutions (IS).
IS recently warned that financial mishaps could cost a retirement fund and its members millions of Rands. The company said that fund management errors include loading too many or too few stocks onto portfolios, non-payment of interest on bank accounts or fixed interest securities and investing in securities such as an unlisted instruments that are specifically excluded from a mandate and thus in contravention of a mandate.
Errors such as these can result in a portfolio being either overvalued or undervalued, both of which can lead to a situation where some fund members could gain at the expense of other members. Braudo explained that effective risk management of an investment portfolio requires that everyone involved in managing the portfolio develop an intuitive sense of a portfolio's performance numbers.
Institutional and even individual investors are going to demand a greater explanation of the types of risks they are taking and they are going to demand methods for monitoring these risks through time. Trustees will need to be aware of these requirements and accommodate their investors.
By Janet Du Chenne
In the first of a two-part series, Russell Lee (left) and Tom MacAulay (right) from Legal & General's Pension Risk Transfer business look at pension consolidation vehicles from different angles and provide an insurer's perspective
In this week's Pensions Buzz, we want to know if you think trustees should consult directly with members before agreeing to a DB superfund buyout.