Aligning members’ investments with market movements
“Robust approach to creating an efficient and a low-cost set of pension arrangements and investment choices in a small market based on passive management,” judge’s comment
WINNER
● Eurolife’s retirement solution was first launched in 2016 and has since re-branded under the Smart Future moniker, with a new investment philosophy focusing on straightforward, transparent investment portfolios, a broad global diversification and added benefits to members. Flexibility to employers and members is at the core of its philosophy.
● Smart Future operates as a multi-employer, defined contribution plan. As such the investment risks are borne by the members and to help confine the risks, it offers four distinct pension funds and investment options to members, each with its own clearly defined investment profile. Their investment strategies are implemented by the selection of appropriate mutual funds (UCITS) and Exchange Traded Funds (ETFs), focusing mainly on passive strategies benchmarked against global broad market indices. To ensure adequate diversification of risk, Smart Future follows an open-architecture fund of funds approach.
● Smart Future's passive management approach is considered a unique offering in the local market and is gaining traction among prospective clients. It adheres to a disciplined strategy that aligns the medium to long-term interests of fund beneficiaries with transparent and clear investment strategies. Portfolios are periodically rebalanced with respect to their strategic weights, mitigating the risk of deviation from the risk profile and target allocation of each pension investment fund. This assurance allows members to select funds that maintain consistent exposure in line with their predetermined risk allocation.
● Moreover, the decision to primarily use passive funds establishes a stronger alignment with the long-term interests of fund beneficiaries. The selection of broad market indices for investments ensures a more global exposure across asset classes and sectors, thereby reducing investment risk. Passive management is typically associated with lower fees in comparison to active management. An additional advantage is therefore the combination of low costs and predictability in investment performance, which closely mirrors international markets.
STRATEGIC TAKEAWAYS
➤ Passive strategy based on mutual funds and ETFs |
➤ Four pension investment funds to match members’ risk profiles |
➤ Low cost and predictable strategy based on diverse sectors and geographies |
HIGHLY COMMENDED
Enagás has been improving the way it selects the passive instruments – a mix of funds and ETFs – in its portfolio. A tracking difference ranking is created for all the available instruments with the same benchmark in a specific region. Withholding taxes, fees and other costs as part of its analysis. A liquidity check is also performed to account for market bid/offer spreads. Thereafter a red, yellow or green signal is assigned to every ETF/passive fund according to this ranking. The whole process is reviewed on a monthly basis. Enagás currently invests in around 16 ETFs in the portfolio and monitors on regular basis hundreds of others from different providers. Five years ago, Enagás also crafted a bespoke fund to provide exposure to alternative risk premia in a systematic, liquid, cost-efficient and transparent way.
Judged by
Sylvie Malécot
Joseph Mariathasan
Michel Piermay
Sponsored by
