After the scheme of the occupational annuity plan is basically defined, the enterprise will soon face a problem: ¡°How to formulate or select a suitable investment strategy of the occupational annuity plan¡±? Although it is a legal duty of the trustee institution (corporate trustee institution or council trustee) to formulate the investment strategy of the occupational annuity, the client entrusting should learn about the principle, process and approach of formulating the investment strategy of the occupational annuity plan. This will be the basis for having a better understanding of the investment management operation, for subsequent contract negotiations concerning the implementation of occupational annuity and for the education and training of employees.

In general, investment management of the occupational annuity mainly includes:

Setting Investment Objectives

Occupational annuity, as a kind of pension fund assets, has a very clear feature of preference for safety, and in consideration of an inflationary economic growth, it is a basic objective to assure no decline in the actual purchasing power of fund trust assets. In the meantime, in order to guarantee a long-term steady appreciation, with an assumption of controllable low risks, it is a comparatively realistic objective to strive for a long-term reasonable excess return relative to the performance benchmark.

At the same time, attention has also to be paid to adequate liquidation, and to meeting the anticipated payment and other requirements to be realized at low costs. A main affecting factor in this respect is the change of participants in the annuity plan, i.e. the occurrence of retirement and dismissal. As a result, for an enterprise with a high average age of plan members, a great number of employees approaching retirement and a high rate of dismissal, it is necessary to assess its potential fund liability demand through certain actuarial analyses.

Formulating Investment Policies

There are specific regulatory requirements for the investment scope of the occupational annuity, especially for the limitation on the investment proportion of equity products, and the limitation on the investment proportions of individual securities. Both of these are very important policy guarantees for the assets¡¯ safety and we must strictly follow these bottom lines. In such a process, some enterprises are always subject to the pressure of investment demands for their production redevelopment, or stock prices when being listed companies etc. Thus the wish exists to settle the problem of internal fund demands by using occupational annuity funds. In foreign countries such operations are usually high-pressure lines for the securities investment industry and listed companies. From an impartial point of view this is very unfavorable for the safety of annuity assets, since many bankruptcy cases of pension plans in foreign countries are known.