Whether you’re just starting your career or are already retired, it’s important to carefully consider how your super is invested so you can achieve the retirement lifestyle you desire.
As a member of the Macquarie Superannuation Plan (the Fund), you have access to a wide range of investment options. The Fund’s Investment Menu lists the investment options that are available through your super or pension account.
Risk versus return
The choices you make about risk and potential returns play a big role in your potential retirement outcome. Carefully considering what level of risk you're comfortable with is an important step towards tailoring your super investments to suit your personal goals.
In the world of investments, risk is about how much the value of your investments might go up and down over time. This is often referred to as volatility. Generally, the chance to earn more from your investments comes with a higher level of risk. This means if you're aiming for higher returns, you should be prepared for more ups and downs in the value of the investments. On the other hand, if you’re looking for smoother returns, with fewer (or smaller) bumps, you might prefer investments that are likely to offer lower returns with less risk.
Investment strategies
To help guide your choices, the trustee of the Fund has formulated a range of investment strategies. The investment options available on the Fund’s investment menu are aligned to those strategies and will generally have similar characteristics.
For example, as part of the Fund’s Australian shares investment strategy, members have access to a range of managed funds, exchange traded funds, and separately managed accounts that invest across a range of asset classes (for example, Australian equities, International equities, Fixed income, Property). Refer to the offer document for your super or pension product for further information on investment strategies.
Within each investment strategy, each investment option is designed with specific goals to meet different needs and preferences. The investment option’s objective will help you understand:
whether the focus is on preserving the value of your investments
whether the focus is on providing consistent and steady returns
whether the aim is to provide income or grow the value of your investment (or both)
the expected timeframe to see those returns – it could be short-term, medium-term or long-term, and
how much emphasis is placed on protecting the money you’ve invested.
Knowing what each investment strategy aims to achieve is important. It enables you to choose the investment options that are most aligned with your personal financial goals.
Suggested minimum timeframe
When planning for your future, it's not just about where you invest your super, but also how long you keep it invested. Each of the Fund’s investment strategies comes with a recommended minimum timeframe. This is essentially how long you should consider staying invested in a particular investment strategy in order to achieve the investment objective.
These timeframes align closely with the objective of each strategy. For example, if you're aiming for significant growth over time, a strategy designed for long-term capital growth will suggest keeping your super invested for a longer period. On the other hand, if your focus is on achieving stable returns soon, you can choose a strategy with a shorter recommended timeframe.
Understanding these strategic timeframes will help you make more informed choices so that the investments you select reflect your immediate and long-term needs.
Standard Risk Measure
When exploring different investment strategies, the Standard Risk Measure (SRM) provides a simple way to compare how risky they may be. Here's how it works:
risk bands: each option is assigned a risk band ranging from 1 to 7. Band 1 represents the lowest, while band 7 indicate the highest risk.
what the bands mean: each band gives you an idea of how many times an investment strategy is expected to deliver a negative annual return in a 20-year period. For example, a ‘Low’ risk band (2) suggests there is likely to be a negative return 1 year out of 20 years, whereas a ‘Very High’ risk band (7) means greater than 6 negative annual returns in 20 years should be expected.
The table below shows the estimated number of negative annual returns over 20 years for each band.
| Risk band | Risk label | Estimated number of negative annual returns over any 20-year period |
|---|---|---|
1 | Very low | Less than 0.5 |
2 | Low | 0.5 to less than 1 |
3 | Low to medium | 1 to less than 2 |
4 | Medium | 2 to less than 3 |
5 | Medium to high | 3 to less than 4 |
6 | High | 4 to less than 6 |
7 | Very high | 6 or greater |
An SRM is assigned to each investment strategy, as well as each managed investment, exchange traded fund, listed investment company and listed investment trust and term deposit on the Fund’s investment menu. For Australian listed securities and where an SRM assessment is not readily available, the Trustee may assign a default risk rating of ‘Very high’. The SRMs for the Fund’s investment options are regularly reviewed.
While the SRM is a handy comparison tool, there are some limitations. It doesn’t tell you everything about the risks involved or estimate the size of potential losses, or that a positive return may be less than you need to meet your financial goals.
The offer documents have more information about the SRM and the Fund’s investment menu includes the SRM of individual investments. Both are available from your adviser or online at macquarie.com.au/investing/yourwrap
Target risk and return
When considering an investment strategy, other key features to consider are the target return and target risk.
Target return: this is an estimate of the expected return each year over a minimum period of 15 years for an investment in a particular investment strategy.
Target risk: this measures how much investment returns are expected to go up and down through time. A higher target risk means a greater variation in expected returns from year to year is likely.
The trustee of the Fund sets the target risk and return for each investment strategy using estimates of how asset classes, such as cash, fixed interest, property and Australian and global shares, are expected to perform over time. These targets are used to evaluate potential investments offered under each strategy and to monitor the performance of investment options within the strategies.
The actual risk and return of different investment options within the same investment strategy can vary and may fall outside the target risk and return for the relevant investment strategy. The following example shows how the target risk can impact the target return for an investment.
Example
Consider an investment with a long-term historical target return of 5% per annum. The target risk of the relevant investment strategy ranges from 2% to 4% per annum over the same period. The actual return for that investment would generally be expected to fall within:
a minimum range of 3% pa to 7% pa (ie 5% per annum plus or minus 2% per annum)
a maximum range of 1% pa to 9% pa (ie 5% per annum plus or minus 4% per annum)
Super is essentially a long-term savings plan to support you in retirement. For most people, the goal is to grow their super balance over their working life and have it last for as long as possible during retirement.
You should carefully consider how your super is invested, as the investments you select can make a big difference to how much super you have in retirement.
Your financial adviser can assist you in selecting the investment options that best suit your needs. If you don’t have a financial adviser, the investment options that are available to you within the Fund may be restricted. You’ll also need to choose your investments yourself. If you’d like help finding a new adviser, please visit moneysmart.gov.au/financial-advice/choosing-a-financial-adviser.
