Investment option fact sheet Balanced option (MySuper)

Transcription

1 Investment option fact sheet Balanced option (MySuper) Quarter ended 31 March 2015 July 2012 Description This option invests in a wide range of assets, with a higher allocation to shares, infrastructure and property than fixed interest and cash. It s designed for members seeking medium to long-term growth who are willing to accept short-term fluctuations in returns. Investment objective To outperform (after fees and taxes) the return of the median balanced fund, and an average annual return of CPI + 4% over the medium to long term. Actual asset allocation 31 March 2015 Asset class Actual asset allocation Australian shares 27.3% International shares 34.1% Direct property 7.7% Infrastructure 9.9% Private equity 3.0% Fixed interest 11.2% Cash 6.7% Other: Absolute return strategies 0.0% Strategic Asset Allocation 2014/15 Asset class Strategic asset allocation Range Australian shares 31% 20-45% International shares 31% 10-40% Direct property 9% 0-30% Infrastructure 13% 0-30% Private equity 3% 0-10% Fixed interest 10% 0-25% Cash 3% 0-15% Other: Absolute return strategies 0% 0-10% Fixed interest 10% Private equity 3% Infrastructure 13% Direct property 9% Cash 3% International shares 31% Australian shares 31% Investment costs Investment costs include investment management, custodian and asset consultant fees. They are calculated in arrears. Financial year ending 30 June 2014 Investment Investment performance costs fees Total investment costs 0.52% 0.07% 0.59%

2 Top 20 managers* At 31 March 2015 Manager Asset classes % Industry Funds Management (IFM) Australian shares (Indexed) 7.5% MFS International Shares 5.3% SSGA International Shares 5.0% Baillie Gifford International Shares 5.0% AustralianSuper Australian Shares 4.5% Bentham Fixed Interest 4.3% Fidelity Australian Shares 4.0% IFM Cash 3.7% ISPT Property 3.5% Perpetual Australian Shares 3.4% IFM Int. Infrastructure 3.1% Orbis Global International Shares 3.0% Alphinity Australian Shares 2.7% IFM Aust. Infrastructure 2.7% Genesis International Shares 2.7% Jackson Square International Shares 2.6% Ind.Franchise Partners International Shares 2.5% Airlie Funds Mgmt Australian Shares 2.4% LSV International Shares 2.2% QIC Property 1.8% * by percentage of funds under management for this option. Top 20 Australian Shares holdings # At 31 March 2014 Stock Portfolio Weight Commonwealth Bank of Australia 8.6% Westpac Banking Corporation 7.3% ANZ Banking Group Limited 5.8% BHP Billiton Limited 5.7% National Australia Bank Limited 5.4% Telstra Corporation Limited 4.9% Wesfarmers Limited 3.0% CSL Limited 2.4% Rio Tinto Limited 2.0% Transurban Group Ltd 1.9% Macquarie Group Limited 1.9% Suncorp Group Limited 1.8% Healthscope Ltd 1.3% Woolworths Ltd 1.1% Oil Search Limited 1.1% Insurance Australia Group Limited 1.1% Caltex Australia Limited 1.0% Sydney Airport 1.0% Aurizon Holdings Limited 1.0% Brambles Limited 0.9% # by percentage of funds under management for AustralianSuper. Top 20 International Shares holdings # At 31 March 2015 Stock Country Portfolio Weight Baidu Inc USA 1.5% Amazon.com Inc USA 1.5% Tencent Holdings Limited Hong Kong 1.3% Time Warner Inc. USA 1.1% Samsung Electronics Korea 1.1% Visa Inc USA 1.1% Illumina Inc USA 1.1% The Walt Disney Co USA 1.1% Accenture PLC-A USA 1.1% Microsoft Corp USA 1.0% Facebook Inc-A USA 1.0% Oracle Corp USA 0.9% Reckitt Benckiser Group Great Britain 0.9% Google Inc-C USA 0.9% Nestle SA Reg Switzerland 0.9% Thermo Fisher Scientific Inc USA 0.9% Honeywell International USA 0.8% Apple Inc USA 0.8% Qualcomm Inc. USA 0.8% ebay Inc. USA 0.8% # by percentage of funds under management for AustralianSuper. Investment philosophy and approach AustralianSuper is committed to delivering consistent investment returns over the medium to longer term, with an overriding objective of maximising the retirement benefits of members within the risk framework of each investment option. The Fund s investment philosophy is one of active management of the portfolio through a mix of investment styles. This is reflected in a number of ways, including: regular review of asset allocation reviewing and monitoring investment managers monitoring market developments monitoring new investment instruments and products focusing on the net return to members. The Fund also seeks to enhance members returns by controlling the cost of investing. This is achieved by negotiating competitive fees with investment managers and other service providers and actively managing the tax paid by the Fund. Page 2 of 6

3 The Investment Committee is accountable to the Trustee Board for the investment policy and strategy of the Fund and for overseeing investment decisions, including any matters referred to it by the Trustee Board. It meets monthly or more frequently when required. AustralianSuper s investment decision making process The internal Investment team, headed by Chief Investment Officer (CIO) Mark Delaney, advises the Investment Committee on all investment matters. The team is responsible for research and portfolio management and works closely with the appointed asset consultants in monitoring investment managers and preparing input for asset allocation discussions. Investment style and process AustralianSuper has a well-defined investment decision making process, which governs the activities and interaction between the Trustee Board, Investment Committee, in house Investment Team and the two principal external asset consultants Frontier and JANA. Currently AustralianSuper primarily employs a manager of managers investment approach. We aim to engage the best investment managers globally to manage each asset class. The investment process has five key stages. All major decisions go through three check points our external investment consultants, the internal Investment Team and the Investment Committee. External asset consultants AustralianSuper has two external asset consultants Frontier Advisors and JANA Investment Advisers. Both provide strategic advice and research on specific asset sectors. They also provide input to strategic and active asset allocation decisions. Frontier Frontier is responsible for Australian shares, direct property, infrastructure and private equity. JANA JANA is responsible for international shares, currency, fixed income, cash and absolute return strategies. Page 3 of 6

4 Internal investment management With the rapid growth of AustralianSuper over recent years, it makes better sense for us to bring investment expertise in-house. While providing more input into and control over investment decisions, it also reduces our costs and reliance on external consultants and managers. We see the biggest benefit being lower costs being passed through to members through better returns. In the second phase of a five year plan, we have made significant inroads on our internal management strategy. The internal Australian equities team is in place and has been actively managing a portfolio that has already delivered strong net benefits for our members. Our infrastructure team has participated in a few large direct investments that have seen significant savings in management fees and positive contributions to returns. The property team has been expanding its international portfolio, establishing partnerships in the US, UK and Europe, as well as Australia. These partnerships help us identify opportunities and manage the day-to-day running of direct acquisitions. The next phase will see internal capabilities expanded to cover Australian small cap equities, international equities, direct loans and credit instruments. Strategic asset allocation The Investment Committee determines the strategic asset allocation (SAA) and asset allocation ranges for each investment option annually. The SAA serves as a guide for the allocation of new funds received into each investment option but is tempered by tactical decisions, taken at the monthly Investment Committee meeting for the allocation of cash flows. We do not automatically rebalance the investment options back to the SAA. The Investment Committee reviews the asset allocation at each meeting in light of current economic conditions and the market outlook. Decisions on the SAA and the short-term asset allocation strategy draw on research performed by the internal investment team and the Fund s two principal asset consultants, Frontier and JANA. The output is synthesised into a paper for the Investment Committee. Balanced option sector tilts At 31 March 2015 Balanced option Strategic Asset Allocation 2014/15 Actual Asset Allocation Equities 62% 61.4% Australian Broad caps 31% 22.9% Australian Small caps 3.6% International Developed 25% 28.3% International Emerging 6% 5.5% REITs 0% 1.0% Private Equity 3% 3.0% Unlisted assets 22% 17.5% Direct Property 9% 7.7% Infrastructure 13% 9.9% Hedge Funds 0% 0.0% Bonds & Cash 13% 17.9% Global Bonds 10% 11.2% Government Bonds 3% 4.0% Credit and Loans 7% 7.2% Cash 3% 6.7% TOTAL 100% 100.0% Currency 23.0% 24.2% Developed 16% 16.9% Emerging 6% 7.3% (Estimated data at 31 March 2015 on a portfolio look through basis) Page 4 of 6

5 Currency Currency hedging can protect portfolios with international assets from adverse movements in exchange rates. It involves converting a percentage of the value of a portfolio s international assets into Australian dollars. When we set our strategic asset allocations every year we set a target currency exposure for each investment option that includes international assets. Investment option Target currency exposure 2014/15 Actual exposure 31 March 2015 Balanced option 23.0% 24.2% Portfolio structure In structuring the portfolio, we first look at the objectives for each asset class to guide the overall construction of the asset class. Managers and investments are then selected to meet the desired construction and objectives of the asset class. In relation to the construction of each asset class, key decisions include the split between active and index management and tilts within the portfolio (e.g. in equities this may include exposure to small caps, long short strategies and sectoral tilts). In determining the manager configuration, we consider a combination of qualitative and quantitative factors. Quantitative factors include the manager s tracking error, performance history, correlation with other managers in the portfolio and expected volatility. Qualitative factors include manager styles and preferences for certain market sectors and/or stocks. We use a variety of analysis to report and monitor the portfolio characteristics. Managers will only be included in the portfolio if they can be expected to reduce the risk of the portfolio or increase returns. AustralianSuper uses a variety of software programs to report on these portfolio characteristics prior to managers being considered for a mandate. If a new manager is added to the portfolio, we already have an in depth idea of the stocks and positions that the new manager will bring. Manager selection In selecting investment managers, a number of criteria are considered, including: the strength of personnel employed by the manager, their experience in their particular role and relevant qualifications the performance track record of the manager and whether the staff that have achieved that track record are key personnel the appropriateness of the manager in complementing other managers the Fund may have for a particular asset class. Manager research comes from the internal Investment team and our asset consultants who each apply their detailed analysis process. We use a series of negative screens to filter out managers that don t meet our standards, which vary from one asset class to another. Screens can include: poor ownership structure inappropriate funds under management lack of transparency lack of an investment track record poor investment process or decision making process lack of quality investment professionals, portfolio managers or analysts inappropriate or no alignment of interests between the fund manager and AustralianSuper. Monitoring and review Each asset class is monitored at the total asset class level and at the manager level. At the portfolio level we look to ensure that the portfolio structure is in line with our strategic views. This involves measuring the performance of the asset class against the relevant benchmark and ensuring the construction of the asset class reflects the appropriate tilts decided by the Investment Committee. At the manager level we look to ensure that managers continue to demonstrate a sufficient level of skill to meet the portfolio s objectives. We meet with each manager at least once a year in their offices. Our asset consultants also conduct in-depth reviews of managers for all asset classes. The mandate with each manager requires them to provide regular information on investment performance and portfolio construction. In addition the manager is required to report any major shifts in investment strategy and/or style as well as significant changes in the management structure and key personnel as soon as practicable. strength of the investment firm, its management structure and ownership criteria the investment process used by the manager, how the process is developed and what improvements the manager has made to their process Page 5 of 6

6 Where we believe a manager is not performing in the required manner the Investment Committee will be advised and provided with a plan regarding the monitoring that will be undertaken of the manager. We will immediately place any manager on watch if it has underperformed for three consecutive quarters or where there is a departure of a key person from the manager. This initiates a formal review by the internal Investment team in conjunction with the appropriate external asset consultant. Where appropriate the manager may be asked to present to the Investment Committee concerning its current performance and actions being implemented. Where a manager on watch fails to show an improvement in performance, a recommendation will be prepared by the internal Investment team in conjunction with appropriate asset consultant for the Investment Committee. Where the recommendation includes the termination of the manager, it will contain a proposal regarding the reallocation of the funds managed by that manager. The Investment Committee will consider the recommendation and, where appropriate, may interview the manager or approve the decision to terminate. This document was issued in March 2015 by AustralianSuper Pty Ltd ABN AFSL , Trustee of AustralianSuper ABN , and may contain general financial advice that does not take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, consider your financial requirements and read the Product Disclosure Statement, available at or by calling Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. Strategic asset allocations and other information is current as at 31 March The Trustee may alter the strategic asset allocation or the composition of individual asset classes from time to time to suit prevailing market circumstances. Page 6 of 6

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