18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.
18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.
18.3. A description of the investment policy of the SWF should be publicly disclosed.
The Company’s primary goal is to improve asset management efficiency as well as to increase assets yield in the long-term by maximising risk–adjusted returns through assets diversification in a manner consistent with the Investment Strategy.
To achieve its goal, the Company invests in traditional and alternative assets in the international financial markets with the investment horizon of 10-20 years, and other types of activities involving trust asset management.
The Company realises to a full extent the risks it is exposed to in the investment process. The risk management procedures are clearly identified in the Investment Strategy. Specifically, to manage risk, the Company introduces the limits, with an aim to regulate the level of risks. According to the Investment Strategy, the limits are imposed on:
- Types of financial instruments
- Asset allocation
- Geographic allocation
- Value at risk
- Investment structure
In terms of the leverage level, it is important to note, that the Company assigns its level to each asset class and manager individually.
The Company actively implements risk management by monitoring possible risks, including credit risk, market risk, liquidity risk and operational risk.
The current allocation and the asset classes the Company invests in are described in the Investment strategy.
The Company conducts a tender process in order to select the alternative investment and active equity managers. The manager selection process is described below:
- the Company publishes the tender announcement on its website, Bloomberg and through the distribution of formal notifications to potential managers from the Company’s contacts list;
- the potential managers, who fit the minimum criteria described by the type of mandate, compete in the tender by providing the information defined in the request for proposal (hereinafter - RFP);
- the Company analyses the proposals based on the predefined evaluation criteria and forms the long list of potential managers;
- investment due diligence and operational due diligence are held on the long list of potential managers prior to recommending the list to the Investment Committee. The Investment Committee selects the most competitive managers and defines the short list;
- the short list is presented to the Board of Directors of the Company who defines the final list of managers. Finally, the managers are approved by the Executive Board of NBK.
The agreements are signed with each of the selected managers, where all terms and conditions, as well as the responsibilities (including reporting procedures) of the manager, are identified.
The Company monitors the performance on a constant basis.
Disclosure of the Investment strategy is subject to the NBK’s decision and can be provided upon request (given the NBK’s agreement to do so).