The next sub-process is implementation.
The steps in this sub-process:
a) defining efficient benchmarks
b) selecting partners, including investment guidelines and implementation
c) exercising shareholder rights
d) cash management
e) risk management including ESG topics
f) strategic build-up/reduction of portfolios
g) tactical asset allocation (TAA) and disciplined rebalancing
a) Defining efficient benchmarks
A benchmark is defined for each asset class that provides the most efficient representation of the desired risk/return profile from the perspective of the PUBLICA portfolio as a whole.
b) Selecting partners, including investment guidelines and implementation
The requirements for internal and external asset managers are equally stringent. PUBLICA seeks out the most capable partners for each asset class. Where possible, a back-up solution is put in place for each asset class. This redundant approach means that another asset manager can step in promptly if required.
c) Exercising shareholder rights
Voting rights are exercised in the interests of insured members, and dialogues are conducted with the aid of external specialists.
d) Cash management
Liquidity requirements are planned out in advance where possible, using cash management to ensure that all benefits can always be paid, and claims satisfied, when they are due.
e) Risk management including ESG topics
One of the key tasks of risk management is to identify, measure, monitor and steer risks and earnings at the level of overall assets. Risk management ensures that invested assets are managed in accordance with the specifications and that the risk budget is adhered to. Risks within the investment process should be measured as uniformly as possible and assessed consistently. Those risks that are not compensated by a premium are minimised. Unquantifiable risks and their potential impact on the portfolio are identified and assessed annually (ESG risk analysis).
f) Strategic build-up/reduction of the portfolios
Adjustments to comply with new strategic asset allocations are carried out gradually over time, taking account of transaction costs and liquidity levels. PUBLICA Asset Management decides on the speed at which an existing strategic asset allocation is to be adjusted towards a new allocation. The relative performance of the assets of the pension plans is measured against this “pro rata” strategy.
g) Tactical asset allocation (TAA) and disciplined rebalancing
Tactical decisions – i.e. temporary overweights and underweights relative to the “pro rata” strategy – are used to generate added value (higher net return or lower risk) over the medium term. The “pro rata” strategy is rebalanced monthly to ensure that the strategic allocation is implemented in a disciplined manner.