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Old Mutual Life Assurance Company has declared a 17,5 percent bonus on the Guaranteed Fund for the year ended December 31, 2013

Old Mutual Life Assurance Company (OMLAC) has declared a 17,5 percent bonus on the Guaranteed Fund for the year ended December 31, 2013, dominantly driven by unrealised equity gains.
The bonus represents a 10.5 percentage point increase from the previous year’s performance. The entity also declared a 5 percent interim bonus for 2014 which will be continuously reviewed throughout the year to take into account movements in the investment markets.

The Guaranteed Fund is a pooled investment vehicle that mainly caters for pension and preservation funds in the country.
Addressing clients at the Guaranteed Fund Bonus Declaration cocktail party, OMLAC’s Actuarial Divisional Manager, Ms Rutendo Magorimbo, said they currently had over US$800m in funds under management.

“This gives investors access to a diversified range of assets, which they may not be able to access on their own. Assets include listed equity, private equity, shopping malls, warehouses, office parks and residential building projects. The fund is growing and OMLAC currently constitutes 79 percent of the market share by assets under management, according to the IPEC, third quarter 2013 report.

“The fund has positive net client cash flows – meaning that benefits can be paid from current contributions without the need to sell assets at possibly sub-optimal prices. This is a plus in our economy which is currently facing liquidity challenges,” said Ms Magorimbo.

She said a number of factors are considered in coming up with the bonus rate. These include the future economic outlook, the current level of the smoothing reserve and the need to maintain equity between the different classes of policyholders – those who are leaving the fund, those who are joining and those who are remaining in the fund.

“The bonuses declared aim to pass on real value to the clients in the long run and in declaring the bonus the actuaries need to ensure that the level is such that the fund remains sustainable. The bonus for 2013 is split into a vested bonus of 7,5 percent and a non- vested bonus of 10 percent.

“The non-vested bonuses are vested over a period of 10 years. This is to take into account the uncertain nature of unrealised gains and to protect the fund from selective disinvestments that may prejudice remaining members,” she added.

The fund is predominately invested in equities and properties and the long-term investment strategy of the fund is to grow the interest bearing portion of the fund and to move into alternative investments such as private equity and infrastructure developments thereby diversifying the portfolio even further.

Cumulatively since dollarisation, the bonus that has been declared on the OMLAC Guaranteed Fund amounts to 399 percent with a vesting ratio of approximately 67 percent — FinX.