Corporate Selection
Umbrella Funds
Changes to
Default Investment Strategy
What is a default investment strategy?
The Corporate Selection Umbrella Funds offer a range of investment
portfolios targeted at investors with varying investment needs, preferences
and risk appetites. These portfolios range from specialist asset class funds,
through risk-managed balanced funds up to capital guaranteed funds.
The default investment strategy is targeted at as wide a range of investors as
possible, offering a balanced blend of the above-mentioned attributes.
What is the current default investment strategy?
The current Corporate Selection Umbrella Funds’ default investment strategy
is the Multi Manager Life Stage strategy.
What is a Life Stage model?
A Life Stage strategy is a customised investment strategy, designed to maximise
post retirement income of retirement fund members, subject to acceptable
investment risk exposure.
In order to earn inflation-beating returns over time, it is necessary to have
exposure to growth assets such as equity. However, growth assets are
inherently volatile in nature. As members approach retirement, their ability to
withstand significant reductions in asset values decreases, and their need for
certainty when planning for retirement increases. A Life Stage strategy takes
these changing investment needs into account.
Why invest in a Life Stage strategy?
The benefits of investing in a Life Stage strategy include:
•Simplified decision-making regarding funds to invest in
•Exposure to high-growth investment assets early on in the member’s career
•Allows for inflation-beating growth on member’s assets as the member
approaches retirement
•Focus on capital preservation closer to retirement age
The current default investment strategy
The current Multi Manager Life Stage strategy offers three stages through
which retirement fund members’ monies move as the members approach
retirement.The different stages successively invest in aggressive (growth stage),
moderate (consolidation stage) and conservative (preservation stage) assets
as the members approach retirement.
Multi Manager Life Stage strategy design
Consolidation Stage
Asset Allocation
Growth Stage
Preservation Stage
100%
80%
60%
40%
20%
0
> 7 years
7-6 years
6-5 years
5-4 years
4-3 years
Years to Retirement
3-2 years
2-1 years
1-0 years
The new default investment strategy he
new Default Investment Option
The new default investment strategy on the Corporate Selection Umbrella
Funds will be the Liberty Life Stage.
The Liberty Life Stage:
•Is simpler in design,
•Offers an extended exposure to high-growth asset classes
•Has a strong focus on minimising the impact of downside market
movements on the returns experienced by the retirement fund member.
•Is designed to offer inflation-beating growth in the medium to long term,
but with stable returns in the short term.
•Uses the Liberty Stable Growth Fund in the growth stage, a Fund designed
to offer inflation-beating growth in the medium to long term, but with
reduced volatility of returns experienced by the member in the short term.
•The preservation stage invests in the Liberty Corporate Advanced Bonus
Fund, which is designed to offer a 100% capital guarantee on all investments,
with upside exposure to the local equity market
Liberty Life Stage strategy design
Asset Allocation
Growth Stage
Preservation Stage
100%
80%
60%
40%
20%
0
> 7 years
7-6 years
6-5 years
5-4 years
4-3 years
Years to Retirement
3-2 years
2-1 years 1-0 years
Changes in investment management feesnt Fees
The Liberty Life Stage strategy is designed to be a cost-effective investment option
in the Corporate Selection Umbrella Fund investment range. The Liberty Stable
Growth Fund – which forms the growth stage of the Liberty Life Stage strategy – will
be mainly passively managed, hence reducing the investment fees payable.
The fee structure will change from the current sliding scale to a set flat fee, charged
implicitly in the portfolio unit price, as shown in the table below.
Multi Manager Life Stage
Growth Stage
Consolidation Stage
0.70% - 0.95%
0.65% - 0.85%
Liberty Life Stage
Preservation
Stage
0.40%
Growth
Stage
0.60%
Preservation
Stage
0.40%
• Current Multi Manager Life Stage strategy funds include a 0.25% explicit administration platform handling fee, which will
not be charged on the new Liberty Life Stage
• Above fee scales exclude performance fees (various structures for current Multi Manager portfolios have performance
fees applicable)
• All other admin fees to remain the same
• An upfront charge of 0.50% is payable on the Liberty Corporate Advanced Bonus Fund
Regulation 28
All the stages of the Liberty Life Stage will invest in funds that
are compliant with Regulation 28 of the Pension Fund’s Act
of 1956, and will be managed such that they remain compliant
with the regulation as it is amended from time to time.
Investment performancevestment Performance
The Liberty Life Stage strategy is designed to offer stable, attractive returns in order to
maximise the retirement fund members’ post retirement income, whilst taking on appropriate
levels of investment risk, depending on the period left until the members’ retirement.
A major focus of the investment philosophy of the Liberty Stable Growth Fund (forming
the growth stage of the Liberty Life Stage strategy) is downside protection of investment
returns in down markets. The Fund is also designed to be able to participate fully in
running markets. The Fund also has a smoothing element and declares returns monthly in
advance, which further reduces the volatility of returns for the members, allowing them to
remain invested in the growth stage of the Life Stage strategy for longer, when compared
to a typical Life Stage strategy.
Cumulative performance over time
Multi Manager Life Stage
Liberty Life Stage
Asset Value
R 500 000
R 420 929
R 400 000
R 346 212
R 300 000
R 200 00
R 100 000
R0
10
9
8
7
6
5
4
3
2
1
0
Years To Retitrement
• The returns of the new Liberty Life Stage strategy have been determined using an actual existing fund, with a similar design and
investment philosophy to that envisaged for the Liberty Life Stage.
• Alexander Forbes Global Median Best Investment View was used for the period prior to inception of the Multi Manager Life
Stage funds.
• Simulation done for period between 2002 and 2011
As can be seen from the illustration, the Liberty Life Stage strategy is designed to offer more
stable and attractive cumulative returns when compared to the Multi Manager Life Stage.
Disclaimer: Please note that the returns used in the above illustration are back-tested returns, and illustrate how the Liberty Life Stage
strategy would have performed had it existed at the time, and had it been managed as per its intended investment mandate. Past
performance cannot be extrapolated into the future and is not always an indication of future performance.
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LOG ONTO www.libertycorporate.co.za
Disclaimer:
The information contained in this document does not constitute advice by Liberty. Any legal, technical or
product information contained in this document is subject to change from time to time. This document is
a summary of features of the product. If there are any discrepancies between this document and the
contractual terms or, where applicable, any fund rules, the latter will prevail. Any recommendations
made must take into consideration your specific needs and unique circumstances.
Liberty Group Ltd is an Authorised Financial Services Provider in terms of the FAIS Act (no. 2409).
© Liberty Group Ltd 2011. All rights reserved.
RF 05/12