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Investment Channels Available

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When saving money for retirement, it is important to earn as much interest or returns as possible. Therefore, your money in the UCTRF has to be invested in the portfolio that best suits your needs.

The UCTRF Board try to ensure that they cater for the needs and requirements of the bulk of the members. One of the ways in which they do this, is to provide members with a range of investment portfolios.

The Board has designed three main investment channels to deal with the different needs of members with respect to their Inflation Risk and Final Payment Risk.

Life Stage Model - Default choice

Not all of us are investment experts. The Board acknowledges this fact and therefore provides members with an investment model where their Accumulated Retirement Savings will be moved to a less volatile portfolio as they near Normal Retirement Date. This is due to the accepted practice that younger members should be invested in a portfolio with the highest possible potential returns over the long term, but should then be moved to a less volatile portfolio as they age, to ensure they do not suffer large capital losses (also known as Final Payment Risk) should the markets crash just before their retirement.

How does the Life Stage Model work?

From the beginning of the year in which you turn 59, your Accumulated Retirement Savings will be adjusted in small monthly steps of 1.25% until the end of the year in which you turn 63, at which point 75% of your Accumulated Retirement Savings will be invested in the Capital Preservation Portfolio and 25% will remain in the Balanced Portfolio.

Please Note:

This model is suitable for retirement at Normal Retirement Date. If you don’t exercise a choice when joining the UCTRF, your retirement saving contributions will automatically be defaulted so that it is invested in accordance with the Life Stage Model as described above.

Member Investment Choice Model

Members can choose what percentage of their should be invested in the three portfolios on offer: the Capital Preservation Portfolio, the Balanced Portfolio, and the Shari'ah Compliant Balanced Portfolio. This model is suitable for members who are comfortable with investment concepts, making their own investment decisions and/or members who have planned to retire from the earlier or later than their .

For more information regarding the costs and fees associated with your investments, please click here.

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Let’s take a look at each of these portfolios on offer.

The Capital Preservation Portfolio is invested predominantly in money-market and fixed income instruments but also has the ability to include other asset classes or strategies such as smooth bonus funds, hedged equity and offshore asset classes. The prime objective of this portfolio is to achieve returns above inflation of between 1% to 3% p.a. while also focusing on preserving the Rand value of your Accumulated Retirement Savings. It is possible to achieve negative returns on a monthly basis but generally targets positive returns over any particular year.

Suitable for:
Members wanting protection against inflation but who are also concerned with Final Payment Risk, i.e. a member that may withdraw or retire from the UCTRF in the next 2 years. It is also suitable for drawing a pension income for living annuitants who decide to retire within the UCTRF.

Risk:
This portfolio gives some protection against Inflation Risk. It does not only include money market instruments but also bonds and, to a limited extent, hedged equity or offshore asset classes. The capital value of these assets may decline at some points in time, but the focus of the portfolio is on capital protection.

Objective:
Returns of 1% to 3% above CPI (inflation).

The Balanced Portfolio is expected to give the highest return of the three portfolios offered by the UCTRF over the long term.

Suitable for:
Members with 6 years or more before exiting the UCTRF.

Risk:
The portfolio is invested in various asset classes including equities, listed property, bonds and offshore assets and is expected to deliver the highest returns over the longer term. It also has a high chance of delivering returns above inflation over the long-term and therefore has very little Inflation Risk for periods greater than 7 years.

Objective:

Returns of 5% above CPI (inflation).

The Shari’ah Compliant Portfolio has been set up to comply with Shari’ah law, and has an asset allocation that is somewhat more conservative than that of the Balanced Portfolio.

The managers have a mandate to adhere to the following key Shari'ah principles:

The ban on interest: interest must not be charged or paid on any financial transaction, as interest is deemed unlawful by Shari'ah.
The ban on financing certain economic sectors: companies involved in the following activities are not Shari'ah compliant –
o Conventional financial services
o Alcohol and tobacco
o Non-Halaal food production or processing activities
o Entertainment (casinos, gambling and pornography)
o Weapons and arms manufacturing

It is expected to give a return that is lower than the Balanced Portfolio over the long term due to the lower possible allocation to equities.

Suitable for:
Members who wish to comply with Shari'ah law in this way or members who object to investing in certain industries, such as alcohol or tobacco.

Risk:
Deals mainly with Inflation Risk but is somewhat more conservative than the Balanced Portfolio and is managed according to Shari'ah investment principles.

Objective:

Returns of 4% above CPI (inflation).