An overall investment strategy also comprises four internally managed portfolios.
Strategy for LD Discretionary Voters
LD Discretionary accounts for just over 90 per cent of the total assets in The Cost-of-Living Allowance Fund. LD Discretionary is therefore the flagship scheme for its members.
-
The Cost-of-Living Allowance Fund has historically delivered high returns. Members therefore have a legitimate expectation that this will continue to be the case in the future.
We aim to achieve the highest possible return for our members by putting together a strategic portfolio with a high expected return.
-
The return must be achieved with a reasonable degree of stability, reflecting a balance between risk appetite and adequate security.
Stability is achieved by spreading risk across several asset classes.Â
-
An increasing proportion of members are over 60 and can have their savings paid out at a few days’ notice. The Cost-of-Living Allowance Fund therefore aims to ensure adequate liquidity in the portfolio so that it can pay out members’ savings quickly and without unnecessary capital losses.
Liquidity management must ensure that payouts are made with the least possible inconvenience to remaining members – even during periods of increased payouts.
-
The Board of LD Pensions sets the overall investment limits for LD Discretionary on an annual basis. The Board has set stricter limits on LD Discretionary’s investments than those required by the LD Act, in order to limit investment risk.
-
Portfolio management is carried out in accordance with limits on exposure to individual investment assets, including the derivative financial instruments belonging to the respective asset classes. In addition, limits have been set for interest rate and foreign exchange risks. For less liquid investments, limits have been set for the total exposure.
-
The portfolio is managed with a view to active ownership and a focus on corporate governance, particularly in companies where the ownership stake is significant. Investments must comply with the policies on responsible investment practices.
Strategy for portfolios
In addition to LD Discretionary, The Cost-of-Living Allowance Fund is responsible for managing four other equity and bond funds.Â
The Board of Directors sets the overall investment limits for the internally managed portfolios.
Simplicity and ‘traditional’ securities
The overall strategy of The Cost-of-Living Allowance Fund, which focuses on simplicity and transparency, also applies to the internally managed portfolios. Consequently, emphasis is placed on ensuring that the portfolios offered to members have comprehensible risk profiles and investment patterns, and that the range of portfolios on offer is transparent to members.
