Issues and a proposal for automated retirement portfolio risk matching in South Africa

This paper is an investigation into the issues related to introducing automation to portfolio optimisation for risk matching. Three main aspects are discussed. First, the South African legal context, which determines what is permissible and what is required in terms of automated decision making. Secondly, the risk profiling aspect discusses problems in the design and use of risk profiler questionnaires. As a solution we propose a standardised risk profiler which addresses the issues identified in traditional risk profilers. Finally, the portfolio optimisation section discusses different models of risk and proposes a constrained multi-objective model for retirement portfolio optimisation suited to the South African context.