It’s become somewhat of a cliché for companies to say that their most valuable resource is their people but many expressions become commonplace precisely because they hold a great deal of truth. That’s certainly the case when it comes to the expertise behind the investment options within Old Mutual SuperFund.

Old Mutual’s SuperFund was created specifically to meet the needs of employers and their employees regardless of the industry, company size or type of work. As with all retirement funds, a critical component of SuperFund is its investment strategy and Old Mutual Multi-Managers (OMMM) supports the Fund via strategic investments that allow employers and employees a range of investment options to suit their specific needs and provide members with the best possible income.

What are the advantages of a multi-manager investment strategy for retirement-fund members?

The greatest benefit of a multi-manager approach is that fund members get access to some of the best asset managers in South Africa and around the world wrapped into one portfolio. This diversification of manager thinking, style and expertise contributes to a more predictable outcome. OMMM’s core philosophy is that the crucial hurdle for long-term savers, whether for retirement or something else, is inflation. Therefore the primary focus of our investment solutions is to beat inflation by a margin. This margin will differ from one portfolio to the next and influences the risk profile of each solution – the higher the target (margin), the more the risk.

Beating inflation is important to investors. Failing to do so means they’re getting poorer in terms of spending power. When it comes to retirement savings, it’s not enough to just beat inflation. The reason for this is simple: most members cannot afford to save a big chunk of their salaries each month, so they save a little every month and rely on investment markets to help their savings to grow. In other words, they need returns of inflation plus 5% or 6% per year over the long term to reach the required capital by the time they reach retirement age. They don’t have to get that every year, but they do have to get it on average, and that can be a challenge. Contributions still matter, so at least 15% of salary needs to be saved every month and when real returns of 5% or 6% per year are added over at least 35 years of working, retirement will not be a financial headache.

The economic environment is such that returns have been low for an extended period and inflation has increased sharply. As a result, it has been challenging to beat inflation over the last decade or so and inflation-targeting has become less popular with investors and investment providers alike.

We at OMMM remain convinced that inflation is still the main investment hurdle for retirement-fund members, so our core approach of targeting inflation-beating returns remains intact.

Since we are focussed on inflation, we pay less attention to the current state of markets and what the herd is doing. Our approach therefore is more patient and long-term, limiting knee-jerk reactions on our side and allowing us to take advantage of behavioural errors by investors who may have been swayed by their emotions.

We also believe in the value that alternative assets, like hedge funds and private markets, add to a diversified balanced portfolio. They are different to traditional assets and while they can generate meaningful returns, what really matters is that the returns they earn are not highly correlated to traditional assets. This adds to diversification and more stable returns.

What does OMMM look for in an asset manager?

Evaluating asset managers is not easy. Markets are dynamic and a successful track record over any period is due to a combination of skill and luck. The prevailing market conditions at the time and how suited the asset manager’s management style is to those conditions can play a big role in returns.

The challenge when trying to identify the top asset managers is to differentiate skill from luck. In our experience this can’t be done overnight. We engage with a wide range of managers, deeply and on an ongoing basis, to understand them and their businesses, including the way they think, how they make decisions and how they operate, invest and react to change and even adversity.

OMMM’s own team works this way and have an average of 22 years’ asset-management experience per person. The result is a long track record of delivering patient, steady, incremental, inflation-beating returns that, in conjunction with disciplined saving by members, add up to give members the best chance to retire comfortably.

If you are interested in Old Mutual SuperFund, call 0860 20 30 40 or visit the SuperFund communications hub for more information, reports and updates.