Careless treatment of savings at the 2nd pillar of pensions, which most people do not associate with their direct savings, usually changes in times of crisis and economic turmoil, and Covid-19 is no exception.
The fall in the market caused by the pandemic this spring was the largest since 2008, but at the same time the recovery period was one of the shortest. This has stimulated interest – why does an investment plan do much better, where and how the money is invested, what is the benefit for itself and the economy?
One of the big questions asked by investment fund and pension savings managers is choosing the right or most profitable investment strategy. Of course, a simple answer to this question has not been found, as it depends on many different circumstances, but basically it all starts with two philosophies or basic investment management strategies – passive and active.
In the first case, the funds are placed in global financial markets, copying the market structure exactly. Investments are made in so-called index funds, in which the value of invested funds fluctuates with one of the world capital or financial market indices.
In turn, active management includes a detailed assessment of which specific assets are more profitable and promising to invest in. Although an active investment strategy has its advantages: the direction of investment can be changed more flexibly and quickly according to market developments, historically an active management strategy does not justify itself as a panacea, and only some global managers perform higher than financial markets as a whole.
In my opinion, the strategy is fundamentally right, because in any financial market conditions there will be individual assets or companies that will provide significantly better returns compared to the market. However, here we face a significant shortcoming, ie the amount of human resources needed to manage all available assets, all companies from which to choose the best investment objects. In addition, each specialist in investment management companies often knows their segment and often lacks a system that effectively aggregates this amount of knowledge. This can lead to biased / biased investment decisions.
However, this does not mean that the active management strategy does not work and must be abandoned. Rather, solutions need to be found to address individual shortcomings, to turn these shortcomings into opportunities. The “explosion” of technological development in recent years must also be used here.
Today, we can automate many processes and thus save and gain. We saw the potential of CBL Asset Management technologies in improving the investment strategy several years ago and research and later development and testing was started. We used our professional experience and new technologies to create a model – a large amount of data a processing algorithm that takes into account a wide variety of information parameters for each of the companies in which to invest. Thanks to the performance of computers and the extensive data available, we can analyze a large amount of data for each company – current and historical technical / financial data (earnings, turnover, etc.), both stock market data and development forecasts.
The algorithm has gone through a long testing phase to be able to select the investment objects whose value has the greatest chance to grow in relation to the overall level of the market. We review the model very regularly and, using it continuously, adjust the investment strategy accordingly, creating an optimal, diversified portfolio.
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