Question:
How secure is an investment, say a preservation fund, with 10X?
Answer:
Mark,
It depends on what you mean by secure. From a governance and legal perspective, the investment is very secure - the preservation funds (as do all our other funds) comply with the requirements of the FSB, the Pension Funds Act and Regulation 28. The Board of Trustees overseeing the funds is made up of a majority of independent, professional trustees, the Fund's assets are ring-fenced, the script is held in safe-custody with Deutsche Bank, and the funds are audited by PwC.
10X only invests in liquid and transparent assets: shares (including property shares) listed on the JSE, bonds listed on the BESA (government and inflation-linked), cash (Rand and USD), and offshore equities (via two Vanguard index funds).
But you are exposed to investment risk, as you are in every type of retirement fund. Investment returns are not guaranteed. 10X uses an indexing strategy so investors get the index return (before fees) for each of the above asset classes (this eliminates active management risk, which is an unrewarded risk for the average investor).
The investment return may be positive or negative. 10X uses a life-staging approach to manage this investment risk, ie investors with a long-term time horizon are automatically allocated to our high equity portfolio (up to 75% in shares) as they can afford to ride out volatility, investors closer to retirement enter a preservation glide path that gradually de-risks their portfolio as they approach retirement. We apply the same principle to our RA fund, our preservation funds and to our Pension/Provident Umbrella funds. Investors can opt out of the default glide path, if they choose.
