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Strategic and tactical asset allocation

In accordance with statutory requirements, any investment risk to administered severance pay entitlement capital must be minimised. In this this statutory environment, APK Vorsorgekasse AG endeavours to accomplish an optimal investment mix.

Hence, strategic asset allocation is strongly impacted by the regulatory environment and by budgetary accounting. An environment of positive cash flows and limited capital guarantee obligations (on account of a history of positive investment results) allows us gradually to focus on more profitable investment segments (e.g., equities). In consequence, in a positive capital market environment, APK Vorsorgekasse asset allocation can progressively evolve and further increase profitability in the coming years.

While over the past few years our investment activities served mainly to establish risk buffers, it is now possible to optimise and refine strategic asset allocation to utilise enterprise-related investment segments (equities and bonds).

Strategic asset allocation

Current asset allocation:

  • equities: 20%
  • bonds: 65%
  • other investments: 3%
  • property: 7%
  • money market: 5%

In order to be able to respond to changes in the market, we have established tactical divergence margins within which asset positioning can vary in a ‘normal’ capital market environment. In extraordinary circumstances, or in consequence of unforeseen events, the upper or lower boundaries of these divergence margins may be exceeded. In any case, risk management always constitutes a crucial factor.

Tactical asset allocation

Currently, the divergence margins are defined as follows:

  • equities: 10% - 27%
  • bonds: 50% - 80%
  • other investments: 0% - 5%
  • property: 4% - 10%
  • money market: 0% - 35%

Scenario analyses and loss probability serve as starting points for integrating the respective investment categories into the total portfolio. Current economic developments are analysed to facilitate prompt and flexible decisions as the occasion demands.

The committee tasked with taking such decisions is made up of the board of APK Vorsorgekasse AG, the investment team, and Risk Management. In the run-up to such decisions, external expert opinion is consulted to assist with opinion formation. The committee convenes on a monthly basis, in the course of a tactical asset allocation meeting; decisions regarding strategic asset allocation are taken once every quarter.