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Changes to investment options

Posted 1 March 2013 11:41am

CSC, the trustee of MilitarySuper, has changed investment return objectives and target asset allocations for some of the investment options of MilitarySuper.

The changes do not impact on the determination of your benefits entitlements within MilitarySuper that reflect the special nature of service in the ADF.

The new investment objectives are set out in the table below:

 

Investment option

Investment return objective Investment horizon

High Growth

CPI + 4.5% 15 years

Balanced

CPI + 3.5% 10 years

Growth

CPI + 3.5% 10 years

Conservative

CPI + 2% 5 years

CSC has changed the investment objectives for these options because we expect that, for the same level of risk taking, average investment returns in the decade ahead will be lower than those generated in the stronger growth environment of the 1980s-2000s. This reflects the ongoing impact of the global financial crisis. As developed economies reduce their debt, growth in economic activity and in corporate earnings is likely to be lower, on average, than the decades preceding the crisis.

CSC believes that it is important to reflect our view on future investment returns into investment objectives. This allows you to make informed choices about which investment options are most suitable for you, based on those objectives and the tolerance for risk within each investment option.

For the Growth option (the default option) tolerance for risk is defined as a 20% probability of loss. This is broadly equivalent to an expectation that the Growth option is likely to generate at least one year of negative returns in every five years. CSC expects that, to maintain this tolerance for risk, real returns for the Growth option (in other words, returns above inflation) are likely to average around 3.5% per annum over the next decade. Importantly though, in any one year, real returns may vary materially.

Target asset allocations for investment options have also changed. Asset allocations and further information about the impact of investment returns on your benefit is available in the MilitarySuper Product Disclosure Statement (PDS) and the Member Investment Choice Guide. Both documents are available from the PDS page.

Some other changes to investment options which will occur in 2013 are:

    • the High Growth option will be renamed Aggressive;
    • the Growth (default) option will be renamed Balanced
    • the Conservative option will be renamed to Income Focused.

These changes will occur from 1 July 2013. Options are being renamed primarily to better reflect underlying objectives and investments.

The current Balanced investment objective and target asset allocation has been changed to be the same as the Growth option. This is a precursor to merging these two options later this year, and renaming the combined investment option as Balanced. We will provide further information about this change before it occurs.

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