The Key to Long-Term Investment Success
Strategic Asset Allocation (SAA) plays a crucial role in achieving long-term investment success. The allocation of assets over the long term typically drives the majority of investment returns. Diversification within the portfolio helps protect against the negative impact of individual securities and smooths volatility over time. Studies have shown that long-term asset allocation decisions account for over 80–90% of overall portfolio performance.
What is Strategic Asset Allocation (SAA)?
SAA refers to the decision of how to allocate your investment across different asset classes over the long term. This includes determining the types of assets in which you would like to invest and the proportion of your portfolio that will be dedicated to each class.
The most common asset classes include:
- Cash (e.g., bank deposits)
- Fixed Income (e.g., bonds issued by governments or corporations)
- Equities (e.g., stocks of companies)
Occasionally, portfolio managers may choose to include alternative investments, such as Hedge Funds, Private Equity, Commodity Funds, and Real Estate.
Our Approach at Ancoria Insurance
At Ancoria Insurance, we build our SAA in close cooperation with our partner financial institutions. For our multi-asset Pension Funds—such as Ancoria Conservative, Balanced, and Growth—we invest across all four asset classes mentioned above. We develop a unique SAA for each fund, maximizing the expected risk-adjusted return by considering the following key factors:
- Investment Horizon: Since these are Pension Funds, the investment horizon is long-term.
- Investment Objective & Risk Tolerance: Portfolios with higher risk have the potential for higher returns over time, though they may also experience short-term fluctuations.
- Capital Market Assumptions (CMAs): These are forecasts from our partner institutions regarding the expected risks and returns of various asset classes over the next seven to ten years.
- Regulatory Guidelines: We also adhere to the legal framework set out under the Law on the Establishment, Activities and Supervision of Institutions for Occupational Pension Benefits of 2020, and the associated Regulations N. 10(I)/2020.
Once a year, we review our SAA by evaluating the updated economic expectations provided by our partners. If necessary, we adjust our SAA positioning. In addition to the annual review, we also conduct monthly Tactical Asset Allocation (TAA) meetings, where we may tactically deviate slightly from our SAA to exploit temporary market imbalances or mitigate risks during volatile periods.
Pension Funds SAA – 2025 Update
In early February, we conducted our annual SAA review for the Ancoria Pension Funds. Given the potential for short-term volatility, we made adjustments to our SAA by increasing allocations to cash and cash equivalents, as well as alternative investments. These changes aim to protect the portfolios and offer potential upside in times of market stress.
