Standard Risk Measure
To help members assess risk, standard risk measures have been introduced for the investment options. The Standard Risk Measure (SRM) is a simplified risk measurement tool that helps members compare the risk of negative returns for investment options, both within the Fund and between funds. Investment options are graded across seven ‘risk bands’ from 1 (Very Low Risk) to 7 (Very High Risk). The Standard Risk Measure 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.
The Standard Risk Measure 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 reach their objectives. Furthermore, it doesn’t take into account the impact of administration fees and tax on the likelihood of a negative return. Members should ensure that they are comfortable with the risks and potential losses associated with their chosen investment options.
Use of derivatives
Derivatives are investments that get their value from an underlying asset, such as bonds or shares. Investment managers may buy or sell derivatives to help manage the risks of the underlying asset and protect against, or benefit from, investment volatility.
The Fund’s investment managers may use derivative instruments from time to time for limited purposes. The Trustee has adopted a Derivative Risk Statement setting out the conditions for the use of derivatives by investment managers.
The derivative transactions undertaken by the Fund’s investment managers are, principally, share index futures and foreign exchange contracts.
Legitimate uses of derivatives include:
- hedging to protect the value of assets against any significant decline in investment markets
- the hedging of overseas currency exposures; and
- as a means of making tactical asset allocation adjustments while minimising transaction costs.
However, the managers are not able to use futures, options or other derivative instruments for high-risk speculative purposes.
Derivatives are used by some of the Fund’s investment managers:
- currency hedging is implemented via forward exchange contracts which are classified as derivatives.
- two of the Fund’s cash mandates are also established as a ‘swap’ which is classified as a derivative.
- the Fund’s Managed Volatility Process (MVP) employs a futures overlay to manage extreme volatility in the Moderate and Growth MVP investment options.
- the Trustee also has a ‘swap’ arrangement established with Goldman Sachs International as part of a strategy to invest the fixed term pension products assets.
At all times during the year, the Fund’s net derivatives exposure has not exceeded 5% of the total assets of Maritime Super.
Allocation of investment returns
Your returns come from earnings on the Fund’s investments. Costs and any Government taxes are deducted from earnings and the remainder distributed to accounts through unit prices.
For all investment options other than the Fixed Term Investment option, the returns are based on movements in the value of the underlying investments (for example, shares, bonds, properties). Unit prices are calculated daily and are available at www.maritimesuper.com.au.
For the Fixed Term Investment option, the investment return is the fixed interest rate that is determined at the start of the term. Returns are added to your account at the end of the term. If you withdraw your investment before the end of the term, the Trustee will determine whether or not some interest is payable and if so, the interest will be added to your account upon withdrawal of your investment.
Please note the following exceptions for Defined Benefit members:
- only benefits in the accumulation accounts have investment earnings allocated as noted above;
- allocation of investment returns is not applicable to the defined benefit portion of a member’s benefit (i.e. where the benefit is defined by formula), including the Offset account (maintained for Permanent (Defined Benefit) members of the Stevedores division).
Monitoring of investment performance
The Trustee and Investment Committee monitor the performance of the Fund’s investments at three levels:
- Maritime Super investment options
- asset class; and
- investment manager.
The Trustee and Investment Committee receive monthly updates on monthly, quarterly, financial year-to-date, annual, three-yearly, five-yearly and ‘since inception’ investment performance, from our appointed principal investment adviser, JANA Investment Advisers.
Investment advisers
The Trustee has appointed JANA Investment Advisers as its principal investment adviser to provide expert advice to the Trustee and management in relation to the Fund’s investments. The Trustee also appoints specialist investment consultants as needed. In particular, Quentin Ayers is contracted to provide advice in relation to particular private market investments.
Reserving policy
No investment earnings are credited to an investment reserve for the purpose of smoothing members’ investment returns.