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Choose the right specialist for the job

IN SHORT: Trustees of a retirement fund must fulfil various complex responsibilities to manage, grow and safeguard the fund’s capital which can consist of billions of rands. To do this properly they employ the services of specialist financial services providers.

Retirement funds have hundreds, sometimes thousands, of members that contribute monthly. Consequently, the funds must preside over large amounts of capital. For example, the Government Employees Pension Fund has over 1 million active members and assets worth 2,3 trillion rand – a trillion is 1 followed by 12 zeros!

A retirement fund’s main objective is to grow this money through investing in a portfolio of assets (shares, debt, property) so that members can receive retirement payouts and/or death benefits.

Managing such a large pool of money requires financial expertise. This is where an investment company, also called an asset manager, steps in. These companies specialise in managing large amounts of capital. They have dedicated investment professionals with in-depth knowledge of financial markets, asset classes, and investment strategies.

But you probably know this already.

Another crucial albeit lesser-known responsibility of a retirement fund is to ensure its assets remain protected while in its care. This specialised service, called custody service, is usually provided by financial institutions like banks.

Why are these specialists needed?

Let’s go back to the trillions in the fund. When so much money is involved, there will always be dubious people or organisations trying to get their hands on it. Governments, regulators, banks and other financial institutions have put many, and often complicated, checks and balances in place to protect the movement of money.

Specialist financial service providers implement robust security measures to protect retirement funds’ assets from loss, theft or unauthorised access. These institutions are also well versed in the regulatory requirements governing the safekeeping of money.This level of security is often challenging for retirement funds to replicate internally due to limited resources. Also, due to potential conflicts of interest, it is risky for a retirement fund to handle its own capital. It’s much safer to involve a neutral and trusted third party.

Let’s look at three important services offered by specialist financial service providers:

By collaborating with specialist financial providers, a retirement fund can simultaneously protect its assets while focusing on its core responsibilities: looking after the interests of its members.