Defining Goals

Defining the exact goals and objectives as well as the available degrees of freedom regarding the strategic decisions is a prerequisite for determining a strategy for designing the investment and liability side that meets the specific requirements in the best way possible.

Definition of objectives and identification of risks

Close cooperation with the investor to establish the objective and risk hierarchy as precisely and comprehensively as possible
Clear definition of the individual short, medium and long-term objectives (e.g. funding stability, cash flow matching, growth)
Clear definition of tolerances with regard to possible target deviations (= risk), which can include setting absolute limit values or limit states
Determination of a hierarchy of objectives to identify compensating and reinforcing effects between individual objectives
Determination of component weighting and setting of constraints
Documentation of the strategic objective and risk preferences as a step-by-step guideline for the following process steps and as a building block for organisational documents (e.g. governance, investment policies, etc.)

Definition of model properties

Definition of the relevant liabilities by type, grouping and aggregation
Definition of assumptions and methods for the preparation of liability forecasts for a highly conservative and accurate capturing of risks
Critical evaluation of the existing investment universe based on qualitative aspects (e.g. fungibility, cluster risks, process requirements, etc.) as well as quantitative aspects (analysis of individual assets/portfolio in relation to changes in market value, cash flows, outlier events, etc.)
Expanding the investment universe to include markets and instruments that qualitatively and quantitatively show high potential individually or in the portfolio context to contribute to a higher degree of objective achievement
Definition of the required statistical characteristics of the scenarios for liabilities, returns and fundamental factors including higher moments, potentially also with different phases of development and special scenarios (e.g. runs, stagflation, historical events, etc.)
Definition of management rules (reallocation, payments, distributions, etc.) and valuation rules (accounting/P&L, regulatory law, tax, management metrics, etc.), which are simulated 1:1 as they are applied in reality.