independent review (p.9) -process in place to allow for the comprehensive review of the...
TRANSCRIPT
Independent Review (p.9)- process in place to allow for the
comprehensive review of the appropriateness, effectiveness and adequacy of the investment governance framework at least every three years; and
- is conducted by an operationally independent, appropriately trained and competent person
Process (p.11)- is there a determined investment objective for
each investment option;- is there a specific and measurable target
investment return objective; and- do the investment options allow for adequate
diversification
Roles, Responsibilities and Reporting (p.10)
- investment strategy roles and decision making roles are operationally independent; and
- all roles have clear reporting structuresInvestment Risk Management (p.9)- investment risks are identified and
considered in the context of Prudential Standard SPS 220 Risk Management
Skills, Expertise and Resources (p.10)- appropriate skills, expertise and
resources available to make informed decisions in the best interest of beneficiaries
Investment Governance Framework
Developing an Investment Governance Framework
Asset Allocation (p.14)
- clearly defined and documented asset allocation targets and ranges;
- the basis on which these would be changed;- an investment horizon and investment
objective for investment option(s); and- any investment restrictions including
counterparty exposure limits and use of derivatives
Risk Budgeting (p.15)
- is there a process in place to regularly review the impact of risk movements on its risk allocation; and
- the subsequent implications for the rest of the asset allocation of an investment option
Strategic Asset Allocation (SAA) (p.15)
- asset allocation ranges set at levels which allow for movements in the actual asset allocation;
- ranges are not too wide or too narrow to render the strategy unconstrained or ineffective; and
- asset allocation rebalancing strategy
Dynamic Asset Allocation (DAA) and/or
Tactical Asset Allocation (TAA) (p.15)
- formal policy document that governs the DAA/TAA process; and
- the specific market factors and/or conditions that would trigger a change
Investment Portfolio
Construction
Investment Portfolio Construction
Review Process (p.11)- Board formally reviews the investment strategy
annually at a minimum; - establish triggers that may lead to interim reviews of
the investment strategy; and- results from each review to be reported to the Board
Investment Strategy (p.10)- investment strategy for each investment option
and for the whole RSE; and- considers the benefit structure, the membership
profile, the size, stability and growth rate in terms of assets under management, the tax position of the RSE and the broader financial marketsMySuper Product Option (p.13)
- diversified over multiple sources of risk factors and sources of return;
- compliance with s.29VN(d)(i) and s.29VN(d)(ii) of the SIS Act is documented;
- compliant with the rules for the relevant permissible fees; and
- explicitly considers the diversification and liquidity needs of its membership profile
Investment and Return Objectives (p.11)- set investment objectives to achieve the desired
investment outcome for each investment option; and- set specific and measurable target investment return
and risk objective aligned to the size, business mix and complexity of the RSE
Diversification (p.12)- investment strategy has an appropriate composition of investments;- is exposed to multiple sources of risk taking into account other factors
such as liquidity, credit or macro risks (to achieve a desired risk exposure) and return; and
- impact on overall diversification in different market conditions
Risk Objectives (p.12)- investment risk objective is clearly articulated and
measurable;- risk objective includes reference to the potential
variability of returns; and- loss appetite is considered in addition to the standard risk measure (SRM)
Investment Strategy and Investment Objectives
Investment Strategy and Investment Objectives
Monitoring, Reviewing and Reporting (p.21)- annual reporting to the Board at a minimum;- triggers for an interim review of the investment
strategy; - operationally independent persons assess the
performance of each investment; and- have in place systems, structures and processes to
measure and report the performance of each investment within the portfolio
Development and Construction (p.17)- formal process and criteria for selecting each
investment;- undertaken prior to selecting the
investment/manager; - sufficient understanding of each investment and
how it is expected to perform; and - the investment is appropriate for the investment
option
Derivatives and Currency Exposure (p.20)- sufficient mechanisms to capture, monitor and manage; - potential risks associated with the use of derivatives such as liquidity risk, counterparty risk etc.; and- potential risks arising from foreign currency exposures are addressed
Due Diligence/External Providers (p.17)- appropriate analysis to support the due diligence
process; - most suitable approach adopted relative to in-house
capabilities and external expertise available; and- considered in the context of Prudential Standard
SPS 231 Outsourcing
Conflicts of Interest (p.17)- all actual and potential conflicts of interest are
appropriately documented; and- considered in the context of Prudential Practice Guide SPG 521 Conflicts of Interest
Implementing and
Maintaining an Investment
Strategy
Implementing and Maintaining an Investment Strategy
Asset Allocation Rebalancing (p.16)- documented policy for each investment strategy;- monitor and maintain the asset allocation within the
determined ranges and within a reasonable timeframe; and
- the basis for any change, triggers and method of rebalancing, permitted use of derivatives and reporting arrangements
Liquidity Management Plan (LMP) (p.31)
- a LMP that covers each investment option;- outlines the procedures for measuring and
managing liquidity risk and the liquidity risk tolerances;
- outlines the circumstances considered to be a significantly adverse liquidity event that requires action; and
- documents the process for reporting various liquidity issues
Investment Risk Reporting (p.25)- market and economic developments that may result in
altered risk exposures; - investment manager risk indicators (key staff
changes); and- investment option risk profiles measured by tracking
error and standard deviation
Stress Testing Reporting and Review (p.28)
- results and reporting provided at least annually to senior management and the Board; and
- periodic review of stress test results by senior management are documented in the investment governance framework
Stress Testing Program (p.26)- the stress testing methodology and process for the review of
the methodology;- procedures for reviewing and analysing the results of stress
testing outcomes; - the frequency of stress testing; and- triggers for the escalation of stress testing outcomes
Review of Investment Risk Management Arrangements (p.25)
- appropriate segregation of duties between those making investment decisions and those making investment risk management arrangements
Investment Risk Management, Stress Testing and Liquidity Management
Investment Risk Management, Stress Testing and Liquidity Management