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Investment Policy of Old Retirement Corporation Essay

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Updated: May 10th, 2022

Introduction

There has been budget allocation of retirement plan at Old Retirement Corporation (ORC) since its inception. The purpose of this investment policy statement is to give an insight on how the corporation manages its investment options within the return objective and risk tolerance.

Purpose

The purpose of this paper is to highlight the comprehensive investment options integrated in the employees’ retirement plan returns within the budget limits. Other objectives are stated in a written form which is financial analysis team attitudes, prospects, objectives and guidelines for the retirement investment plan and budget limits investment options. Portfolio asset management endeavors ensure investment options meet the prudential requirements.

Statement of Objectives

The investment policy plan is defined according to Old Retirement Corporation (ORC) plan established in 1st January, 2000. The plan includes assets that amount to $3,000,000 which are less by 1 standard deviation (SD) as compared to the past three years. The investment policy statement includes various classes of assets that needed consideration on the best investment styles. The focus is therefore on assets that provide an opportunity to diversify the corporation’s portfolio within the investment time horizon and limitations.

Time horizon

The menu of investment guideline is based on long-term historical returns produced by the management for over three years.

Risk tolerance

The plan recognizes the fact that a number of risks have to be taken into consideration to have a realistic and achievable investment objective. The limits of investment options on risk tolerance are reflected in returns of less than 1 standard deviation. An estimated loss of about ½-yearr amounts to about 0.52% of the calculated portfolio. This is a probability of about 2%. This includes other interim fluctuations in the market valuation as well as rates of return.

Performance Expectations

The planned investment objective is a benchmark of about 5.7% for over 3 years. The return objective is based on the valuation and the investment limitation of the retirement plan. Another assumption considered is the future real returns in the long-term that are expected to increase. The team will focus on evaluating the market performance variances and adjust the rate of return accordingly.

Description of the portfolio

A constrained budget calls for effective management of funds in light of risks and investment limitation, yet targeting the highest return. Therefore, the main objective is to highlight the daily activities of the plan.

Tabulated Summary of the Investment Policy plan

Plan Description (Surpluses/Deficits) Value
Basic Account 90%
Split of Liabilities: Actives: 42%
(Accrued Benefits) Retired: 54%
Inactive: 4%
Average Age of Active Members: 43.8 years
Plan’s Cash flow as a % of Assets: (2.3%p. a)
Average assumed entry age of new Plan members: 31.5
Average assumed retirement age of Plan members: Retirement rates vary Between ages 55 and 65
With 100% of Plan Members assumed to be Retired by age 65

The investment policy statement discloses the main investment options within a limited return objective and risk tolerance. The investment policy statement (IPS) focuses on efficient financial plans. This consists of the economic and psychological factors taken into consideration with respect to human needs (over 45 years and above). In addition, financial resources should be redirected to fund investments in a way that offer employees a convenient financial plan. As such, it gives hope to those exiting employment and have used up their money on other expenses, rather than investment.

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IvyPanda. 2022. "Investment Policy of Old Retirement Corporation." May 10, 2022. https://ivypanda.com/essays/investment-policy-of-old-retirement-corporation/.

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IvyPanda. (2022) 'Investment Policy of Old Retirement Corporation'. 10 May.

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