The Fund strives to maximise returns while remaining below a maximum level of risk. The maximum allowable level of risk is referred to as the “risk limit”.
Investment Return Objective
The Fund’s “investment return objective” is to meet or exceed the actuarial best-estimate discount rate, adjusted for Geneva inflation, over the long term. The achievability of the investment return objective is reviewed in the context of a long-term asset study conducted on a tri-annual basis, or more frequently if deemed necessary.
The Fund’s performance against its investment return objective is measured over a multi-year time horizon, typically five years.
The risk management policy of the Fund is defined in the Statement of Investment Principles (SIP) approved by the Pension Fund Governing Board.
It involves setting a risk measure and an annual risk limit and managing the asset allocation exposure in a way that is compatible with the risk limit.
The 1 Year 5% CVaR risk measure was approved by the Pension Fund Governing Board in 2012, based on the recommendation of the Pension Fund Investment Committee.
The risk measure is an estimate of the potential average loss that has a 5% probability of occurring within a one-year horizon.
The risk limit is approved by the Pension Fund Governing Board on an annual basis, or more frequently if deemed necessary. The current risk limit is set at -8% for the 1 Year 5% CVaR.
The risk exposure of the Fund is measured and reported by an independent risk consultant on a monthly basis.