External Fund Managers (EFMs) are selected following a detailed process of evaluation and assessment. For this purpose detailed requests-for-proposal are sent to each prospective fund manager. The main criteria considered in the selection of a fund manager are:
- EFMs Resources and Capabilities.
- Asset Under Management.
- Fundamental and Technical Expertise.
- Investment Philosophy and Style.
- Track Record of Risk Management and Performance.
- Number of Institutional Clients.
- Portfolio Guidelines and Investment Philosophy
EFMs are expected to invest in prime quality marketable securities and to follow a conservative investment strategy while preserving capital in real terms and achieving optimum long term growth. The selection of securities should be primarily driven by fundamental research/analysis and should be supported by quantitative techniques. Furthermore, EFMs are required at all times to comply with all applicable laws and regulations, administrative procedures and professional standards enacted or developed for the protection of KIA.
EFMs are monitored on a daily, monthly and quarterly basis to ensure that the investment objectives and guidelines are strictly followed. The investment guidelines also prohibit the EFMs from investing in the following:
- Share ownership in companies whose principal business involves gambling, liquor or adult entertainment.
- Private placements and venture capitalization.
- Investing in single issuer/issues in excess of 5% of the portfolio at the time of the purchase.
Diversification is an integral factor to KIA's overall investment strategy. The Department is constantly seeking to diversify investments across various geographic locations (i.e. USA, Canada, Asia and Europe), assets (i.e. equities and fixed income) and within asset classes (i.e. growth/value/core for equities; government/agency/corporate for fixed income). Furthermore, diversification is also applied in the distribution of funds across a number of EFMs.
There are strict guidelines, set by the Executive Committee of the Board of KIA, which govern the amount of funds held with each EFMs. Therefore, the Department employs a number of EFM’s in order to adhere to the guidelines and further enhance diversification. The Department also considers the core competency and identifies areas of strength of each EFM.