Munich Holdings of Australasia Pty Ltd Superannuation Scheme

Transcription

1 INVESTMENT GUIDE Munich Holdings of Australasia Pty Ltd Superannuation Scheme Inside Your Scheme s investments 2 Understanding the basics of investing 2 Making your investment choice 4 Your investment options at a glance 5 Your questions answered 10 Investment terms explained 10 Additional investment information 10 Investment risks 11 Important information The information in this document forms part of the Product Disclosure Statement (PDS) dated 27 August 2018 for Accumulation members of the Scheme. It should be read in conjunction with the other documents which form part of the PDS. Information in the PDS is general information only and does not take account of your personal financial situation or needs. You should obtain financial advice tailored to your personal circumstances before making a decision about the product. Any examples included are for illustration only and are not intended to be recommendations or preferred courses of action. Investment returns can be positive or negative and are not guaranteed by the Trustee or the Company. Information on tax and superannuation legislation is current as at 1 July 2018 unless otherwise noted. The Trustee reserves the right to correct any errors or omissions. Information contained in this document that is not materially adverse is subject to change from time to time and may be updated if it changes. Updated information can be found on the website or obtained free of charge on request, by contacting the Scheme Administrator on Contact us The Scheme Administrator Munich Holdings of Australasia Pty Ltd Superannuation Scheme PO Box 1442 Parramatta NSW 2124 Phone: munichsuperadmin@linksuper.com Website: The HR Department Munich Holdings of Australasia Pty Ltd PO Box H35 Australia Square Sydney NSW 1215 Phone: (02) Fax: (02) Accumulation members, 27 August 2018 Issued by Towers Watson Superannuation Pty Ltd (ABN , AFSL ), as the Trustee of the Munich Holdings of Australasia Pty Ltd Superannuation Scheme (ABN ).

2 2 Your Scheme s investments One of the most important choices you have to make is how to invest your super. The Scheme offers five investment options for you to choose from. You must choose one of the options on joining the Scheme or else your application for membership cannot be processed. This section explains the basics of investing and your investment options in the Scheme. The Scheme allows you to choose how to invest your accounts. Each investment option has its own investment objectives and strategy. Investment objectives are broad goals set by the Trustee for managing the Scheme s assets. The investment objectives are neither forecasts nor a guarantee of future investment returns. The Trustee s general investment objectives are to: Invest the assets as permitted by the Trust Deed and by superannuation law, and to exercise those investment powers prudently. Ensure the assets are adequately diversified and have an adequate level of liquidity. Ensure there are sufficient assets to meet benefit payments when they are due. Ensure that investment managers appointed by the Scheme exercise integrity, prudence and professional skill in fulfilling the investment tasks delegated to them, and are fully accountable. The specific investment objectives for each option are set out on pages 5 to 9. The investment strategy for each option is the plan that the Trustee follows to achieve the investment objectives of that option. The Scheme s investment managers are named in the Annual Report. The Trustee may change the managers or products from time to time without prior notice to, or consent from, members. There is no guarantee that the Scheme will always invest in any particular manager or product. The Trustee may also alter or close investment options or introduce new options. You will be advised in advance if a significant change to an option is made. The Scheme has five investment options. You can choose to invest your Accumulation accounts in any one of these options. You can change your investment choice in any month, and once each calendar year free of charge. Your change will be effective from the first day of the following month provided your request is received at least five business days before the month s end. Understanding the basics of investing To help you make the right investment choice, it s important you understand some investment basics. Asset classes Most investments can be broadly grouped into five investment types: shares, property, fixed interest, cash and alternative assets (see page 3). Each of the Scheme s investment options invests in one or more different asset classes. The five asset classes can be grouped into two main categories: Growth assets include shares, alternative assets and global listed property. These assets generally offer higher returns over the long term than other types of assets. They also usually have a higher risk in the short term because returns can vary (or fluctuate) widely from year to year. Growth assets may also experience periods of negative returns on occasions. Munich Holdings of Australasia Pty Limited Superannuation Scheme Income assets include cash and fixed interest, such as Australian and international government bonds, inflation-linked bonds and corporate debt. They are generally regarded as lower-risk investments and offer lower expected returns over the long term compared with growth assets. They also have a lower likelihood of negative annual returns. Understanding the two Rs risk and return In the short term, risk generally refers to the potential for your super to fluctuate in value. Return is the amount of money earned by your super investment. This amount may be positive or negative. Risk and return go hand in hand when you re investing. The higher the long-term return you re aiming for, the greater the risk that your money will fluctuate in value in the short term. That s because, to achieve a high long-term return, you need to invest in a greater proportion of growth investments, which tend to be more volatile than income assets. Year-by-year earnings from growth assets vary a lot more than earnings from income assets. So there s a much greater risk that growth assets will have a negative return in any one year. In the long term, risk can mean: Failing to have enough money in retirement. Choosing an investment option with less risk of fluctuations may mean you earn a lower return on your super. Over a long period, even a small difference in your investment earnings can make a big difference to your final benefit. This is mainly due to the principle of compounded earnings. You may also fail to save enough for retirement in a higher-risk investment option if you retire at a time when asset values are depressed. It is also possible that a more aggressive investment option could produce a large negative return in one year from which it takes many years to recover compared to an investment in a more conservative option. Your investment does not keep pace with inflation (CPI). If you choose an investment option that doesn t have much growth potential, your super may not keep up with CPI over the long term. Over time, prices for goods and services usually increase. If your retirement is some way off, your money won t buy as much by the time you retire as it does today. For more information about investment risks, please refer to page 11. Short term v long term Generally, the following definitions apply to super investments: Short term an investment period of up to three years. Medium term an investment period from three to seven years. Long term an investment period of seven years or more.

3 Level of expected risk and return HIGH Shares When you buy shares, you re buying part ownership of a company listed on a share market. This means that the value of your investment changes in line with the company s share price. Of all the asset types, shares have generally earned the highest return in the long term. However, on the downside, the value of shares will fluctuate more than any other main asset type. Shares also have the highest probability of negative earnings in the short term. The Scheme invests in a diversified portfolio of Australian and international shares. To help minimise the impact of currency movements, the Scheme invests in a combination of hedged and unhedged international shares. Diversifying assets This is a broad category of investments and investment strategies that sit outside the traditional asset classes of shares, fixed interest and cash. Diversifying assets will typically perform differently to traditional asset classes. This means that investors often use these assets to help diversify their investment portfolios. On their own, diversifying assets can produce high returns, but with the risk of high short-term volatility. However, when combined with traditional asset classes, their unique risk and return characteristics can help smooth longer-term returns and reduce volatility. The Scheme invests in funds of hedge funds, multi asset funds and an alternative risk premia fund. Property is another example of a diversifying asset. Investing in property means investing in industrial or commercial real estate. The value of your investment changes when rent is paid and through the increase or decrease in the property value. In general, property provides long-term returns in excess of inflation. Earnings have historically been less volatile over the long term than those produced by shares, and have been higher than those provided by cash or fixed interest. Property investments are either direct or indirect. A direct property investment is where property (real estate) is purchased by a company to be held on behalf of investors. Indirect property refers to an investment in property that is made by purchasing units in a property trust or listed property securities. The Scheme also invests in a portfolio of indirect or listed global property assets, in both Australia and overseas. Fixed interest Fixed interest investments (or bonds ) are issued by Australian and overseas governments, semi-government authorities and companies in return for cash. Interest is paid to investors over the life of the investment at either a fixed or variable rate (e.g. at a rate linked to inflation). The value of your investment changes when interest is paid and when the value of the bond increases or decreases (with interest rate changes). Over the long term, interest-bearing investments have tended to provide higher returns than cash, but lower returns than shares and property. As their value can fluctuate, this asset class is more volatile than cash, but generally less volatile than shares or property. The Scheme invests in a wide range of fixed interest assets, including Australian and international fixed interest, and the more specialised sector of inflation-linked bonds. Cash Investing in cash is similar to putting your money into a bank account. You re investing in short-term fixed interest assets such as bank bills. Interest is paid on the amount you have invested. It s very unlikely that you ll lose money on a cash investment over a short period of time. However, cash investments may not always keep up with inflation. LOW Scheme Administrator

4 Making your investment choice Your investment choice is a personal decision. Before you choose an option, ask yourself three questions: 1. How much super do I need? 2. How much time do I have before I will need my super? 3. How much risk am I comfortable with? 1. How much super do I need? Your answer will depend on your personal circumstances. As a starting point, consider the following questions and how they relate to your situation. How much will I need each year in retirement? Financial experts say that to maintain your lifestyle in retirement, you ll need an annual income of around 60-65%* of what you are earning before tax at the time you retire. This includes income from all sources, not just super. So if you have other investments, you can factor those in. How long will I need an income for after I retire? On average, women live another 24 years # after retiring at age 65. Men live another 22 years #. Of course, you may retire earlier or live longer. It s a long time to support yourself without a regular income. What about inflation? Time makes a big difference to the value of money as shown in the graphic below. In very simple terms, $2,000 in 1975 would have bought you around four times more than in To maintain the real value of your savings, your investments need to achieve a return that is higher than inflation. 2. How much time do I have before I will need my super? It s important to work out your investment time horizon the length of time your super will be invested before you need or can access it. How much time you have before you can access your super may determine how much risk you are prepared to take when you invest. For people with a long investment time horizon, ups and downs in short-term earnings are usually less of a concern than for those who will need their super soon. 3. How much risk am I comfortable with? Remember the two Rs risk and return (see page 2). The level of risk you feel comfortable with will probably change throughout your working life. If you have a longer time to invest you may be more comfortable choosing an investment option with greater exposure to growth assets. Or with less time, you may feel that investing in more income assets is best. * Source: Australian Senate Select Committee on Superannuation, Inquiry into Superannuation and Standards of Living in Retirement. December # Source: Australian Government Actuary, Australian Life Tables , adjusted for 25 year mortality improvement factors (available from The impact of inflation over time What do things cost? Munich Holdings of Australasia Pty Limited Superannuation Scheme

5 Your investment options at a glance Diversified Shares Overview* This is an aggressive option which invests in Australian and international shares. This option may be suitable for members who expect to invest their super for more than seven years. Investors in this option may be seeking a diversified exposure to shares and may be comfortable accepting a very high level of investment volatility in the short term (including periods of negative returns) in order to achieve better capital growth over the long term. The level of currency hedging on international shares will also influence the returns from this option. This option may also be suitable for investors seeking exposure to shares. Investment objectives To achieve a return (net of taxes and investment fees) that exceeds the increase in CPI by at least 4.0% p.a. over moving 10-year periods. To limit the probability of achieving a negative return over moving one-year periods to approximately seven years in 20. Investment strategy Invest 100% in shares, with approximately 30% in Australian shares and 70% in international shares. Benchmark asset allocation Australian shares International shares (hedged) International shares (unhedged) Multi asset funds 52.5% 30.0% 17.5% Minimum suggested investment period At least seven years Likelihood of a negative return in any 20-year period** Approximately six years in 20 Volatility level** High * Note that the information about suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. 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. Scheme Administrator

6 High Growth Overview* This is a diversified option which has a high weighting to growth assets. This option may be suitable for members who expect to invest their super for more than seven years. Investors in this option may be seeking higher capital growth over the long term. They may be comfortable with a relatively high level of short-term investment volatility, which will include periods of negative returns. Investment objectives To achieve a return (net of taxes and investment fees) that exceeds the increase in CPI by at least 3.5% p.a. over moving 10-year periods. To limit the probability of achieving a negative return over moving one-year periods to approximately six years in 20. Investment strategy Invest entirely in growth assets, with approximately 60% in shares with the balance in diversifying assets. Benchmark asset allocation Australian shares International shares (hedged) International shares (unhedged) Multi asset funds Funds of hedge funds Listed property Alternative risk premia Australian fixed interest** Australian inflation-linked bonds Cash 10.0% 7.5% 18.0% 12.5% 10.5% 10.0% 31.5% Minimum suggested investment period At least seven years Likelihood of a negative return in any 20-year period** Approximately five years in 20 Volatility level** High * Note that the information about suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. 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. 6 Munich Holdings of Australasia Pty Limited Superannuation Scheme

7 Balanced Overview* This is a diversified option which invests across the major asset classes, but with a significant weighting towards growth assets. This option may be suitable for members who expect to invest their super for more than five years. Investors in this option may be seeking a diversified portfolio which aims to achieve moderate to high capital growth over the medium to long term with a high level of investment volatility (which may include periods of negative returns). Investment objectives To achieve a return (net of taxes and investment fees) that exceeds the increase in CPI by at least 3.0% p.a. over moving 10-year periods. To limit the probability of achieving a negative return over moving one-year periods to approximately five years in 20. Investment strategy Invest approximately 73% in shares and diversifying assets, with the balance in fixed interest assets and cash. Benchmark asset allocation 2.0% Australian shares Listed property International shares (hedged) Alternative risk premia International shares (unhedged) Australian fixed interest** Multi asset funds Australian inflation-linked bonds Funds of hedge funds Cash ** Includes some exposure to international fixed interest. Minimum suggested investment period At least five years Likelihood of a negative return in any 20-year period*** Approximately three years in 20 Volatility level*** Medium to High 10.0% 15.0% 10.0% 9.5% 5.0% 12.0% 7.0% 20.0% 9.5% * Note that the information about suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. *** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. 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. Scheme Administrator

8 Conservative Overview* This is a diversified option which invests mainly in defensive assets. This option may be suitable for members who expect to invest their super for more than three years. Investors in this option may place a higher priority on reducing investment volatility and may be less concerned about higher levels of growth over the longer term. Although this is a more conservative option, there will be periods of low returns and it is possible that investors in this option may experience negative returns from time to time. Investment objectives To achieve a return (net of taxes and investment fees) that exceeds the increase in CPI by at least 1.5% p.a. over moving 10-year periods. To limit the probability of achieving a negative return over moving one-year periods to approximately three years in 20. Investment strategy Invest largely in fixed interest assets and cash with approximately 37% invested in shares and diversifying assets. Benchmark asset allocation Australian shares Listed property International shares (hedged) Alternative risk premia International shares (unhedged) Australian fixed interest** Multi asset funds Australian inflation-linked bonds Funds of hedge funds Cash ** Includes some exposure to international fixed interest. 5.0% 3.0% 18.0% 9.0% 7.5% 15.0% 5.0% 2.5% 30.0% 5.0% Minimum suggested investment period At least three years Likelihood of a negative return in any 20-year period*** Approximately two years in 20 Volatility level*** Low to Medium * Note that the information about suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. *** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. 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. 8 Munich Holdings of Australasia Pty Limited Superannuation Scheme

9 Cash Overview* This option invests solely in cash and similar assets. This option may be suitable for members who may be planning to access their super in the short term and whose priority is capital protection. Note that returns and capital are not guaranteed. Investment objectives To achieve a return (net of taxes and investment fees) that exceeds the increase in CPI by at least 0.5% p.a. over moving 10-year periods. To minimise negative returns over moving one-year periods to approximately zero years in 20. Investment strategy Invest only in short-term interest-bearing assets (i.e. cash). Benchmark asset allocation Cash 100.0% Minimum suggested investment period Up to three years Likelihood of a negative return in any 20-year period** Approximately zero in 20 Volatility level** Very low * Note that the information about suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. 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. Scheme Administrator

10 Your questions answered How do I make or change my investment choice? To make or change your investment choice, you must complete the Member Investment Choice form, which is available from the Scheme Administrator and the HR Department (see cover page for contact details). You can change your investment option once each calendar year free of charge. A fee applies to any subsequent switches. See the Super Guide for details. Switches can be made at any time and will apply from the start of the following month if received by the Scheme Administrator at least five business days before the end of the month. Can I choose more than one option? You cannot choose more than one investment option at a time. Your existing accounts and all future contributions will be invested in the investment option you have selected. How do I know how my investment option is performing? Each year, the Scheme prepares an Annual Report, which outlines the performance of each investment option, as well as your Member Statement, which shows the balance of your super and how it has performed. Monthly updates on the performance of each option are also available on the website. You can also contact the Scheme Administrator (see cover page for contact details) during the year to find out how your investment option is performing. Investment terms explained To help you better understand the Scheme and the basics of investing, we have defined some investment terms used in this guide. Funds of hedge funds invest in a diverse range of hedge fund managers through the one investment. Hedge funds aim to achieve positive returns regardless of investment market conditions. They do this by using special financial instruments, including derivatives and a variety of other strategies, such as short selling. In isolation, hedge funds can be a volatile investment over the short term, but a fund of hedge funds can help diversify this risk by investing in a wide range of hedge fund managers, which means the Scheme is less likely to be unduly exposed to any one hedge fund manager. Hedging is a strategy to protect against, or at least reduce, a risk. For the Scheme s international share assets, it specifically refers to currency risk. The hedged portion of the Scheme s international share assets are protected from foreign exchange movements while the unhedged portion is not protected. Multi-asset funds invest in a variety of asset classes, such as shares and fixed interest. They are structured in such a way that they are expected to be affected by ongoing economic conditions to a lesser extent than single asset classes. The Scheme uses multi-asset funds to help diversify its investments. Alternative risk premia assets are a special type of diversifying investments which invest in non-traditional assets and use a number of lower cost strategies to generate investment returns. Additional investment information Derivatives A portion of the Scheme s assets is invested in funds of hedge funds and alternative risk premia assets (see to the left for details). The underlying managers for these investments may make use of derivatives to help achieve their objectives. The Scheme s other investment managers only use derivatives for risk- control purposes or to more efficiently shift asset allocations. Investment managers are required to have risk management processes in place in relation to the use of derivatives and the purposes for which they are used. Socially responsible investments The Trustee does not take into account social, ethical or environmental considerations or labour standards for the purpose of selecting, retaining or realising the Scheme s investments. When the Scheme s investment managers are selected, the Trustee does not consider whether the managers take these factors into account. Investment returns Investment earnings are applied to your accounts that reflect the investment returns earned by the investment option you have chosen for your super (net of tax and investment fees). Positive earnings increase the amount in your accounts, while the amount in your accounts will be reduced if the investment earnings are negative. For more information on the taxes and fees deducted from investment earnings, see the Super Guide. Cash flows during the year, including contributions and rollovers, earn investment returns from the date they occur. Reserves The Trustee does not maintain any investment reserves. All net investment earnings are distributed to members. However, it does maintain an operational risk reserve as described below. Operational Risk Financial Requirement (ORFR) reserve Super funds are now required to set aside financial resources to address the fund s operational risks. The Trustee has established an ORFR reserve in the Scheme for this purpose. The Trustee updates members on the status of the reserve in the Annual Report. Members do not currently pay for the funding of this reserve. The Trustee has decided that the ORFR is invested in the same way as the Scheme s Defined Benefit assets. 10 Munich Holdings of Australasia Pty Limited Superannuation Scheme

11 Investment risks Different asset classes perform differently at different times and you should be aware that investment returns can be volatile and the value of your investments may increase or decrease over time. Further, you should not rely on past performance as an indicator of the future performance of any investments. We recommend that you speak to a licensed financial adviser before making any investment decisions. Rises and falls in the value of your benefit can occur for a variety of reasons. The main investment risks that might have an impact on your investment in the Scheme are: Inflation risk The rate of inflation may exceed the rate of return achieved on your investment and hence your investment would not retain its purchasing power. Individual investment risk Individual investments can (and do) fall in value. This risk affects mainly investments in shares and property, although it can also affect investments in fixed interest. Market risk Changes in the investment markets resulting from changes in economic, political and legal conditions, or market sentiment, can affect investment values. This risk affects investments in all asset classes and can therefore be considered a risk (to varying degrees) for all options. Interest rate risk Changes in interest rates can have a positive or negative impact directly or indirectly on investment values or returns. This risk affects all investments and can therefore be considered a relevant risk for all options. 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 considered a risk for the Conservative, Balanced and High Growth options. Currency risk Investments are made in other countries. If their currencies change in value relative to the Australian dollar, the value of the investment can change. This can be considered a risk for the Conservative, Balanced, High Growth and Diversified Shares options. Derivatives risk There are a number of risks associated with investing in derivatives contracts, which include the value of the derivative failing to move in line with the underlying asset, potential illiquidity of the derivative, the Scheme potentially being unable to meet payment obligations as they arise, and counterparty risk (where the counterparty to the derivative contract cannot meet its obligations under the contract). This can be considered a risk for the Conservative, Balanced and High Growth options. Scheme Administrator

12 Accumulation members, 27 August 2018