The day of “an asset manager” is difficult to display if you work for a large institutional asset manager.We work with a lot of people.
The essence of our work as asset manager for pension funds consists of three main components:
- Managing the balance sheet risk of our clients
- Taking and tapping “exposure” to control the risk of balance
- Activities that are involved in taking and tapping risk, as well as reporting and risk monitoring.
On the side of the balance sheet risk, the question is: how do I invest the money so that the risk of not getting the customer’s objective (in our case coverage) is not compromised.For this, models exist and research is needed on economic development in the world and in individual countries. The question that arises is: in what type of investments should I invest? Should I take more or less “exposure” in a particular country or type of instrument and what is the effect on the balance sheet risk?
These are strategic issues.More to the operation are questions like: What currency risk do I want to cover, and what interest rate risk do I want to hedge?
The final question then is: And who is going to do this for us?Do we do it ourselves, or do we outsource it?
With this choice we come into the execution phase.The model is present, now people need to take the desired positions.
For our shares, this is often based on a benchmark.This is followed, in which we arrange the handling as efficiently as possible. Fixed income values (bonds) are more complex, as they have a different kind of portfolio construction.
Liquidity control is also important, it is not the intention that all the money gets stuck in investments and we can no longer pay pensions at the end of the month.
After positions are taken or sold, the settlement process starts.It processes the transactions and ensures that they are properly executed. Because we hold positions for a long time, we also deal with corporate actions and events, for example stock splits and dividend/coupon payments. We must also process these in the systems and ensure that the transactions are handled properly.
If all positions are good we can appreciate it and calculate performance about it (how good/bad we have done it compared to the benchmark).Risk monitoring throughout the chain is also present to ensure that there is not too much risk.
In addition, we also have to deal with various supervisors that we regularly need to provide information, for example the DNB and AFM.
All of the above leads to a huge mountain of information that we need to capture and process, where consistency across systems is of paramount importance. This is also part of the field of an asset manager.
This is in short what we are dealing with daily as asset manager for pension funds.