bti体育 follows a carefully planned and executed strategic investment program to produce, protect, and provide the promised benefits for bti体育鈥檚 members and beneficiaries by:
- Achieving the fund鈥檚 assumed rate of return over the long term
- Mitigating investment risks through fund diversification
- Ensuring adequate liquidity of the fund
Investment Beliefs
The Board has adopted the following investment beliefs (鈥淚nvestment Beliefs鈥) to describe its core beliefs and underlying assumptions about how capital markets operate. Collectively, the Investment Beliefs provide a framework to guide bti体育鈥檚 investment decisions in a manner consistent with the Fund鈥檚 nature as an institutional investor with a long-term investment horizon in order to achieve the Fund鈥檚 objectives defined above.
i. Strategic Asset Allocation
Long-term strategic asset allocation will be the primary determinant of bti体育鈥檚 risk/return outcomes.
ii. Market Dynamics
Capital market efficiencies inform bti体育鈥檚 strategic asset allocation and portfolio construction.
iii. Return
Risk and return are expected to be positively correlated over long-term periods. Returns can be enhanced through active strategies, illiquid investments, and leverage; however, such strategies need to be balanced with bti体育鈥檚 risk tolerances, portfolio objectives, and liquidity needs.
iv. Risk
Risk is a broad term used to capture the concept of uncertainty. No single metric adequately conveys risk. bti体育 will evaluate risk holistically, incorporating quantitative measures and qualitative assessments in managing its portfolio. Monitoring and managing risk is a key focus for bti体育. Risk that is not expected to be rewarded over the long-term, or mitigated through diversification, will be minimized.
v. Stewardship
bti体育 recognizes that environmental, social, and corporate governance factors (ESG) may present financial risks and opportunities for the Fund. bti体育 seeks to identify, evaluate, and manage financially relevant ESG factors in its investment process鈥攊ncluding portfolio construction, investment due diligence, and stewardship strategies鈥攖o safeguard and enhance Fund performance
vi. Terms
Investment outcomes are determined by risk, returns, and costs. All three must be managed, and each mandate should be structured with the best possible terms available across the total Fund to enhance future outcomes.
vii. Productivity
People and resources matter. Constructive talent management, efficient operations and procedures, and a commitment to ongoing education and improvement are essential to optimizing bti体育鈥檚 investment performance.
Asset Allocation
We categorize capital outlays into four categories, defined by the function each serves in the portfolio:
- Growth
- Credit
- Real Assets and Inflation Hedges
- Risk Reduction and Mitigation
These categories are designed to diversify the fund and optimize upside growth, while mitigating downside risk. The asset allocation determines what proportion of the fund is allocated to each functional category and underlying asset class, including target weights and allowable ranges as a percentage of the fund.
In order to determine its strategic asset allocation, bti体育 conducts a comprehensive asset allocation study every three to five years, or at the Board鈥檚 request.
Read more about the role in the portfolio, asset classes, investment approach, and risk factors for Growth, Credit, Real Assets and Inflation Hedges, and Risk Reduction and Mitigation.