By Marinos G. Gialeli
General Manager
Hotel Employees Provident Fund
Â
The Investment Strategy of Provident and Pensions Funds does not represent simple numbers in respect of the portfolio dispersion, but it constitutes a study to be carried out thoroughly by experts based on the fundamental data of members (age, salary, etc.) The Provident and Pension Fund being substantially the second pylon must plan the future of their members in a professional way to reach together with Social Insurances (first pylon) the 2/3 of last salary of the member.
An important factor to the investment policy is the dispersion of the portfolio in different investment categories as well as its dispersion within each category separately. The proper dispersion of the portfolio minimizes the investment risk faced by each pension Fund (and therefore by the members when it comes to a Provident Fund). The overall investment risk of a portfolio must regularly be calculated and be within the desirable limits set by the Management Committee of the Fund; a fact which is very important for the management of the portfolio of a pension Fund.
We, the Hotel Employees Provident Fund, have carried out studies and we have specified the Investment Strategy of the Fund based on the fundamental data of our members.Â
We should mention also that the portfolio dispersion allows us to control in a more efficient way the portfolio risk. For us, the risk must be kept always calculable and predictable, otherwise we will not be able to control and manage our portfolio.
For bringing into effect our strategy, we have employed investment consultants to assist us in choosing the best capital managers as well as to help us develop monitoring and decision making procedures according to the best practices internationally.
Investment products and suggestions must be analyzed and compared with others falling within the same category, otherwise we will not be correct in our choice since we would not choose the best possible solution for the Fund.
We wish to make our investment choices according to correct procedures and based on rationality and the collective decisions of the plenum of our Fund Management Committee. For us, the procedure is very important as the choices must be made among several products and suggestions to ensure not only the best interest of the Fund but also the transparency of the decisions.Â
Consequently, another important element that must be ensured by the Provident and Pension Funds is the transparency towards their members which is one of the most significant elements for their proper operation. Mainly concerning the Governmental Pension Funds, due to the fact that they are public funds, transparency must be ensured for all people involved, as in case that there is a deficit, then this will have an impact to the taxpayer who will end up paying such deficit.
The Hotel Employees Provident Fund has taken necessary measures for the proper information of its members. It has modernized and further developed its operation and organization; a website has be created, www.hepfund.com.cy, available in two languages (Greek and English) in which all the information related to the Fund is posted with the results of returns posted on the first page as well as all the investments in detail. The most important however is that the members may, after entering their code, be informed about their accounts at any moment they wish to do so.
Our short-term plans contain the study for the installation of a call center which will offer to the members the possibility to be informed by phone for their accounts.
Also, the incorporation in the members’ annual statements of different calculations and diagrams related to the future benefits of members when retiring is under study. Their purpose is to demonstrate the pension benefits (including also the retirement pension to be provided by Social Insurances) of each member at different possible ages of retirement in the future, which will enable each member to realize his pension needs and the gap noted concerning the sufficiency of the pension benefits. For the purpose of facilitating the members, we must provide various projections based on the various scenarios such as the future return of the Fund (which is directly connected to the investment strategy mentioned above), the increase of inflation etc. The results should also be presented based on the current real values.
At the same we are always alert concerning the progress of our Fund and we do our best so as our Fund to become an international investor with correct procedures and real transparency.
