We regularly review our investment options with the aim of providing our members, at all stages of their working lives, with the right asset allocation to help deliver their long-term financial goals. The asset allocation of the Fund evolves with the changing economic environment, which has been characterised by an historically unusual combination of factors such as persistent low interest rates, low inflation in a growing economy and sustained low wage growth.
The global market outlook suggests that the economic environment is one in which growth assets are likely to perform reasonably well over the medium-term.
Furthermore, in both shares and bonds, international markets provide exposure to a more diversified spread of investment opportunities than is available in Australia alone. These offer the possibility of delivering more attractive returns, but with potentially lower volatility, as global funds can access a much wider range of economic sectors.
Therefore, increasing exposure to shares in the Aggressive and Growth options, and to infrastructure and property, especially in the Balanced and Stable options, has been viewed favourably by the Fund. The Fund is also being tilted towards international holdings from domestic and reducing the level of foreign currency exposure that is hedged back into Australian dollars.
The Fund continues to drive down the cost of managing its assets and is therefore reducing its allocation to active funds management, in favour of low-cost passive investing. This will reduce exposure to hedge funds in favour of selectively increasing holdings in bonds, including private credit.
These changes have impacted some investment objectives, risk profiles and asset type investment ranges of the Fund’s diversified and single sector options (as outlined below).
The Fund’s focus on maximising returns and minimising investment costs continues to drive changes which aim to deliver returns to assist members in meeting their long-term financial goals and are in line with those of the wider market.