Investment. Choice Guide

Transcription

1 Investment 1 January 2018 Choice Guide The information in this document forms part of the Product Disclosure Statements for the: Accumulation Section (Division 1) dated 1 January 2018 Accumulation Section (Division 2) dated 30 September 2017 Retained Benefit and Spouse Sections dated 1 December 2017 Defined Benefit Section dated 30 September Your investment choices 2 2 Some things to consider 3 3 Investment options 7 4 How your investment works 11 5 Making or changing your investment choice 12

2 1. Your investment choices Toyota Super offers you the choice of four investment options: Aggressive Growth Moderate Cash Each investment option has different investment objectives, risk and return expectations. These are described in detail on pages 7 to 10. You can invest your account balance in a number of ways: You can invest your existing super account in one option, or spread your balance across two options in multiples of 10% as long as the total equals 100% (for example, 60% Growth and 40% Moderate). You can invest your future contributions in the same way as your existing super account, or in another option altogether. This means you can have your existing super accounts and future contributions invested in a maximum of three investment options at any time. If you don t make an investment choice, Accumulation Section members and Spouse Section members will have their account balance and future contributions invested in MySuper Growth. This option is identical to the Growth option. Retained Benefit Section members who do not make an investment choice will be invested in the same options that applied before you left Toyota employment. Member investment choice does not apply to Defined Benefit Section members with the following accounts: Employee Compulsory Account; Defined Benefit SG Minimum Account; Surcharge Tax Offset Account (if any); and Defined Benefit Family Law Account (if any). (For descriptions of these accounts, see the Additional Information Guide for the Defined Benefit Section, available at or by calling the Super Hotline on ) The investment strategy for these accounts depends on your age as follows: Under age 50 Growth Age 50 or over Moderate. 2

3 2. Some things to consider The key to choosing an investment option is to find the balance between security and performance that you feel comfortable with. Some things to consider are: the mix of asset classes risk versus return your investment timeframe your tolerance to investment risk. The mix of asset classes Each of the investment options has a different mix of growth assets and defensive assets. Growth assets generally offer the highest potential for long-term investment growth, but the investment returns can fluctuate from time to time. Growth assets include shares, property and some alternative investments. Defensive assets generally offer less potential for long-term growth (compared to growth assets), but the returns are generally more stable and less likely to fluctuate from one year to the next. Defensive assets include cash (where returns are nearly always positive), fixed interest and some alternatives. Risk versus return As with all investments, there are risks associated with a decision to invest in superannuation and in choosing an investment option. The most common types of risk are listed on page 5. Generally, all investments have the potential to either increase or decrease in value, or stay the same. An increase in value generates a positive return while a decrease in value generates a negative return. Each investment option and each of the asset classes that make up the investment options have different levels of risk and potential for returns. The varying levels of expected risk and return of Toyota Super s investment options is illustrated in the next column. The risk and returns shown below aren t guaranteed and are indicative of past performance only. RETURN CASH MODERATE GROWTH The level of risk of an investment is often expressed as the probability of a negative return over a certain period. On pages 7 to 10, the level of risk of each investment option is expressed as the probability of a negative return in any 20-year period. Your investment timeframe AGGRESSIVE RISK Your investment timeframe is how you long you expect your super monies will be invested. Remember that even when you retire you may still need to invest your super for 20 years or more. The longer your investment timeframe, the more time you are likely to have to ride out the volatility of higher risk investments. You may therefore wish to invest in an investment option that has a higher proportion of growth assets, such as shares, property and growth alternatives. Super Hotline

4 The shorter your investment timeframe, the less likely you will have enough time to ride out the ups and downs of investment markets. You may therefore be more concerned with protecting the capital value of your super monies than achieving high growth and decide to invest in an investment option that has a higher proportion of defensive assets, such as fixed interest, cash and defensive alternatives. Your tolerance to risk Everyone has a different attitude to risk. A level of risk that may be acceptable for you may not be comfortable for someone else. It s a personal decision. For example: Some may be happy to target high returns over the long term by investing in growth assets and accepting the risk of receiving a negative return in some years. Some may take a more balanced approach, not seeking the highest possible returns and, at the same time, reducing the risk of a negative return. Some may be more conservative, and be most concerned to avoid a loss in any year rather than seeking higher long-term returns. Investment managers Toyota Super s investments are managed by professional investment managers with the assistance of the Trustee s investment advisor, JANA Investment Advisers Pty Ltd (ABN , AFSL ), who is responsible for manager selection. The managers and their products are reviewed regularly by the Trustee and may be changed from time to time without prior notice to, or consent from, members. The Trustee itself does not take account of labour standards, governance, environmental and social or ethical considerations in the investment process. JANA includes analysis of the extent to which any new manager appointed includes labour standards, governance, environmental and social or ethical considerations in the investment process as well as the manager s general investment philosophy towards these considerations when selecting, retaining or realising Toyota Super s investments. There is no right answer. Ultimately, your investment choice will require you to make a judgement about which option will help you best achieve your investment goals. Your investment timeframe will change over time and your risk tolerance may also change. It is therefore important to review your investment choice from time to time and make changes if appropriate. If you re unsure of your decisions, we recommend that you seek professional advice from a licensed financial adviser. 4

5 Investment risks All investments, including super, have a degree of risk. The main investment risks are: Inflation risk. The rate of inflation may exceed the rate of return on your investment and therefore your investment would not retain its purchasing power. This can be a risk for the Moderate and Cash options if investing over long periods. Individual investment risk. Individual investments can (and do) fall in value. This risk mainly affects investments in shares and property, although it can affect investments in fixed interest. As such, it can be considered a risk to varying degrees for all the investment options. Market risk. Investment market changes resulting from changes in economic, political and legal conditions or market sentiment can affect the value of investments. This can be a risk to varying degrees for all the investment options except Cash. Interest rate risk. Changes in interest rates can have a positive or negative impact directly or indirectly on investment value or returns. This can be a risk for all the investment options. Currency risk. If an investment is held in international assets, a change in value of their currency relative to the Australian dollar may impact the value of the investment. This can be a risk for the investment options where a proportion of the assets are invested overseas. This includes all the investment options except Cash. Liquidity risk. Liquid assets are assets that can be readily converted to cash. Liquidity risk is the risk that some assets may not be able to be converted to cash when needed to pay benefits or process investment switches. This can be a risk for all the investment options except Cash. Derivatives risk. Funds may be invested in derivative contracts. There are a number of risks associated with investing in derivatives: the value of the derivative may fail to move in line with the underlying asset; the derivative may not be readily converted to cash; Toyota Super or the investment manager may not be able to meet payment obligations as they arise; counterparty risk, where the other party to the derivative contract fails to meet its obligations under the contract. Derivatives risk can potentially affect all the investment options except Cash. Managing derivatives risk The Trustee does not invest directly in derivatives. Toyota Super s investment managers may use derivatives for risk control purposes or to more efficiently change asset allocations. Super Hotline

6 Assessing investment risks To make it easier to compare the risk of each investment option, each one is assessed according to its Standard Risk Measure (see pages 7 to 10). This measure is based on industry standards to enable you to compare the investment options with those in other funds. The following table provides the Standard Risk Measure classification based on how often an investment option is likely to provide a negative return in any 20-year period. Risk Label Estimated number of negative annual returns over any 20-year period Very Low Less than 0.5 Low 0.5 to less than 1 Low to Medium 1 to less than 2 Medium 2 to less than 3 Medium to High 3 to less than 4 High 4 to less than 6 Very High 6 or greater The Standard Risk Measure is not a complete assessment of all forms of investment risk. It does not detail what the size of a negative return could be or the potential for a positive return to be less than what a member requires to meet their objectives. Further, it does not take in to account the impact of administration fees and tax on the likelihood of a negative return. You should still ensure you are comfortable with the range of risks and potential losses and gains associated with your chosen investment options. 6

7 3. Investment options Each investment option is described in detail on the following pages. The benchmark asset allocations shown are the target holdings in each asset class. The actual asset allocation may vary from the benchmark asset allocation. Aggressive Suitable for Investment objectives Benchmark asset allocation and ranges Minimum suggested investment period Likelihood of a negative return in any 20 year period More likely to suit members with an investment horizon greater than 10 years, as there will be fluctuations in capital values over the medium term. The long-term investment objective of this investment option is to achieve returns after fees that exceed CPI increases by at least 6.0% p.a. over rolling five year periods. On a rolling three and five year basis, a rate of return above a composite based on the benchmark allocation of the underlying SuperRatings High Growth Survey median adjusted for fees will be sought. On a rolling three-year basis, outperformance will be sought relative to the notional return on a benchmark portfolio designed to reflect the risk profile according to which the assets are invested. At least 10 years. 4 to 6 years out of every 20 years. Benchmark Range Australian shares 50% [35-65%] International shares 37% [25-50%] Property 10% [0-20%] Cash 3% [0-20%] May also invest in: Growth alternatives 0% [0-10%] Standard Risks Measure TO TO Estimated Expected investment returns* Expected investments returns: Long-term Range over 1 year Range over 20 years * The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The table above indicates the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are not guarantees nor predictions of what will occur. Super Hotline

8 MySuper Growth/Growth Suitable for Investment objectives Benchmark asset allocation and ranges Minimum suggested investment period Likelihood of a negative return in any 20 year period Members seeking medium to high growth. There will be fluctuations in capital values over the short to medium term. The long-term investment objective of this investment option is to achieve returns after tax and fees that exceed CPI increases by at least 4.5% p.a. over rolling five year periods. On a rolling three and five year basis, a rate of return above a composite based on the benchmark allocation of the underlying SuperRatings Balanced Option Survey of diversified funds will be sought. On a rolling three-year basis, outperformance will be sought relative to the notional return on a benchmark portfolio designed to reflect the risk profile according to which the assets are invested. At least 5 years. 4 to 6 years out of every 20 years. Benchmark Range Australian shares 35% [25-50%] International shares 25% [10-40%] Property 10% [0-20%] Defensive alternatives 5% [0-15%] Diversified fixed interest 10% [0-30%] Cash 15% [0-25%] May also invest in: Growth alternatives 0% [0-10%] Standard Risks Measure TO TO Estimated Expected investment returns* Expected investments returns: Long-term Range over 1 year Range over 20 years * The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The table above indicates the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are not guarantees nor predictions of what will occur. 8

9 Moderate Suitable for Investment objectives Benchmark asset allocation and ranges Minimum suggested investment period Likelihood of a negative return in any 20 year period Members willing to accept lower returns with lower risk. Capital fluctuations will occur in the short term. The long-term investment objective of this investment option is to achieve returns after tax and fees that exceed CPI increases by at least 3.0% p.a. over rolling five year periods. On a rolling three and five year basis, a rate of return above the median of the SuperRatings Stable Options Survey of diversified superannuation funds will be sought. On a rolling three-year basis, outperformance will be sought relative to the notional return on a benchmark portfolio designed to reflect the risk profile according to which the assets are invested. At least 3 to 5 years. 1 to 2 years out of every 20 years. Benchmark Range Australian shares 15% [10-25%] International shares 5% [0-15%] Property 10% [0-20%] Defensive alternatives 6% [0-15%] Diversified fixed interest 30% [20-60%] Cash 34% [0-45%] May also invest in: Growth alternatives 0% [0-10%] Standard Risks Measure TO TO Estimated Expected investment returns* Expected investments returns: Long-term Range over 1 year Range over 20 years * The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The table above indicates the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are not guarantees nor predictions of what will occur. Super Hotline

10 Cash Suitable for Investment objectives Benchmark asset allocation and ranges Members wishing to protect their account balances. Capital fluctuations are a very low probability. On a rolling one-year basis, performance in line with the return of the Bloomberg AusBond Bank Bill index will be sought. This option also aims to achieve positive returns after fees each month. Benchmark Range Cash 100% [100%] Minimum suggested investment period Likelihood of a negative return in any 20 year period At least 1 to 2 years. A 0% chance of a negative return in any particular year. Note that your account balance is not guaranteed. Standard Risks Measure TO TO Estimated Expected investment returns* Expected investments returns: Long-term Range over 1 year Range over 20 years * The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The table above indicates the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are not guarantees nor predictions of what will occur. 10

11 4. How your investment works Your account balance and contributions are invested into holdings of units in your chosen investment option(s). The number of units you receive is the dollar amount of your investment in the option, divided by the unit price of the option you have selected. Unit prices The unit price for each option reflects the value of the option s underlying investments after making provision for investment earnings, tax and fees (see the PDS for your membership category for details). Unit prices are calculated on a weekly basis. Toyota Super sets two unit prices for each investment option a buy price and a sell price. The buy price is used when money enters and the sell price is used when money leaves. These prices also apply when you switch investment options. The difference between the buy price and the sell price represents the cost of buying and selling investments, and is also known as the buy-sell spread (see the PDS for your membership category for details). Investment performance The performance of each investment option over a period is determined as the change in the sell price over the period. Net investment earnings (whether positive or negative) are applied to your accumulation account via changes in the option s sell price. If the net investment earnings for the option for the period are positive, the unit price will increase. If the net investment earnings are negative for the period, the unit price will decrease. Details of the performance of the investment options can be found in the latest Trustee Report available at or by calling the Super Hotline on Example: Bill contributes $5,000 to his Toyota Super account on 1 July. The buy price of the investment option he selects is and the sell price is Bill is therefore allocated 500 units at the buy price ($5,000/10.000). If he were to withdraw his super or switch to another investment option at this time, it would be valued at the sell price of (9.995 x 5,000 = $49,975). The difference is the cost of selling his investment. If one year later, on 30 June, the sell price of Bill s units is now , the net investment return is: (Sell price at end of year/initial sell price) 1) x 100 = (10.500/ ) x 100 = ( ) x 100 = 5.05% If the units were worth less at the end of the period than at the beginning, there would be a negative investment return. Super Hotline

12 5. Making or changing your investment choice You can make your investment selections when you join Toyota Super by completing and returning the Application for Membership for your membership category in the PDS. You can choose up to three options at one time (up to two options for your account balance and a third option for your future contributions). You can also change your investment selections at any time. This is known as switching. When you switch, the balance of your accumulation account and/or your future contributions will be invested in the new investment option/s that you have chosen in the proportions you select. You must have a minimum account balance of $1,200 before you can make an investment switch. Defined Benefit members cannot change the investment option in which their defined benefit accounts are invested. Accumulation account members can make one free switch per financial year. For subsequent switches, a fee will apply (see the PDS for details). You can make a switch online at or simply complete and return a Changing your investment options form available from the website or by calling the Super Hotline on Investment switches will be processed on the day the switching request is received by the Administrator. You will be sent a confirmation once the switch is processed. Before making an investment choice or switching investment options you should seek professional advice from a licensed financial adviser. The information in this document forms part of the Product Disclosure Statements (PDSs) for Toyota Super s Accumulation Section, Retained Benefit and Spouse Sections and Defined Benefit Section. This document and each of the relevant PDSs describe the features of the Toyota Super Fund based on the Trust Deed, the legal document that governs the Fund. If there are any differences between the information in these documents and the Trust Deed, then the Trust Deed is the final authority. The information provided in this guide is general information only and does not take into account your particular objectives, financial circumstances or needs. Any examples included are for illustration only and are not intended to be recommendations or preferred courses of action. You should consider obtaining professional advice about your particular circumstances before making any financial or investment decisions based on the information in this guide. Information in this guide was up to date at the date of issue. We may change or update the information in this guide from time to time. Where the change is not materially adverse, you can obtain this information free of charge by contacting the Super Hotline on Issued by Toyota Super Pty Ltd (ABN , AFSL ), as Trustee of Toyota Super (ABN ). Visit Call Super hotline on help@toyotasuper.com.au Write Face to face Toyota Super Admin team, Mercer GPO Box 4303, MELBOURNE VIC 3001 The Fund Secretary, Toyota Super 494 Grieve Parade, ALTONA NORTH VIC