Investment Option – Balanced

This option targets to invest approximately 70% in growth assets and 30% in defensive assets.

 

Investment objective (after fees and taxes over rolling 10-year periods)

To outperform the annual rate of inflation (CPI) by around 2.75% pa.

 

Suitability

Most suitable for members who are willing to accept a medium to high risk of a negative return in any one year.

 

Minimum suggested investment timeframe

Normally five years or more

 

Standard Risk Measure

Risk Band: 5
Risk Label: Medium to High

 

Risk versus return

This option has significant emphasis on growth assets with the aim of achieving higher returns, together with some lower-risk defensive assets to reduce the short-term risks associated with growth assets. It offers a higher expected long-term return than the Moderate option. A negative annual return is anticipated on average 3-4 times every 20 years but negative returns may be more or less frequent.

 

Target Asset Allocation

Managed Volatility Process

The Managed Volatility Process (MVP) is a feature available in the Balanced option.

 

Return

It incurs an additional management fee of 0.25% pa which will impact your net investment returns.

The investment return profile is also modified – returns are expected to be lower in ‘up’ markets but better in ‘down’ markets.

 

Risk

The MVP is designed to more actively manage risk during periods of extreme market volatility. While the chance of a negative return is similar, the magnitude of the negative return in ‘down’ markets is expected to be smaller.

It aims to stabilise investment volatility and still maintain strong exposure to potential growth cycles.

 

Target Asset Allocation

The Balanced MVP targets to invest 96% of funds according to the target asset allocation of the standard option, and 4% of funds to manage short-term volatility through a futures overlay.

 

Note from 1 July 2016, the MVP feature is not available as an add-on to the Balanced option.