Member investment choice
Up until 31 January 2009, the Fund did not offer investment choice to members. All of the Fund's assets were invested in accordance with the investment objectives and strategy for the "Trustee Option".
With effect from 31 January 2009, the Fund has offered Main section members an investment choice, which is referred to as the "High Growth Option". You can elect to have all or part of your account invested in this option. You have the opportunity to switch into or out of the option twice a year, with effect from 30 June and 31 December. Any choice you make will apply to your current account balance and your future contributions.
If you wish to make an investment choice you need to complete a Member Investment Choice Form and return it to the Fund at least one week before the switch date.
From 1 January 2014, the Trustee Option for members in the Main and Spouse sections of the Fund was renamed as MIESF MySuper. The Fund's Pension section members are invested in the Trustee Option which has the same investments as MIESF MySuper.
MIESF MySuper is the default investment option for the Fund. Members not electing to switch part or all of their account to the High Growth Option have their entire account balance invested in MIESF MySuper.
Investment objectives for MIESF MySuper
The aim of MIESF MySuper (and the Trustee Option) is to ensure the security of your retirement money and to provide a reasonable rate of return above bank rates of interest over the medium and long-term without taking undue financial risk. This is based on the Trustee's belief that members have a strong need to preserve capital and achieve a positive earnings rate each year.
In order to achieve this aim, the following investment objectives have been established for MIESF MySuper:
- Avoid a loss; that is to be in a position to declare a positive rate of return for each year ending 30 June (the short-term return objective); and
- Beat inflation; that is to achieve a rate of return which exceeds the rate of inflation (as measured by the CPI) by at least 2% per annum, after allowance has been made for tax and investment costs, over rolling ten-year periods measured at each 30 June (the long-term return objective).
Please note that the investment objectives are neither a forecast nor a guarantee of future performance.
The Trustee reviews these objectives annually to ensure that they continue to be appropriate for MIESF's members. The review considers different aspects of MIESF's membership such as member ages and average balances.
The Trustee has developed an investment strategy which it considers is likely to allow MIESF MySuper to achieve its investment objectives over the indicated timeframes. There is the risk that as market conditions change, the investment objectives may not be achieved. Investment markets can both rise and fall, and for this reason a positive return cannot be guaranteed. The investment objectives had been achieved by the Fund each year for more than 25 years until, unfortunately, the short-term return objective to avoid a loss was not met during the tumultuous financial markets experienced in 2007/08 and 2008/09. Since then, MIESF MySuper has again delivered positive returns each year.
There is an industry wide "Standard Risk Measure" which measures the estimated number of negative annual returns over any 20 year period. This has been calculated at 2.9 for MIESF MySuper and the Trustee Option. The Standard Risk Measure covers seven Risk Bands/Risk Labels from 1 (very low risk) to 7 (very high risk). The Risk Band for MIESF MySuper and the Trustee Option is 4 (medium risk).
Investment strategy for MIESF MySuper
In order to achieve its investment objectives, the Trustee invests the Fund's assets in a number of different asset classes including Australian and overseas shares, property, private equity, infrastrucure, fixed interest and cash. The Trustee sets the investment strategy in the interests of members: you have no ability to select the underlying investments.
In establishing the investment strategy for MIESF MySuper, the Trustee groups asset classes by return drivers and risk attributes. Each asset group plays a different role in a diversified portfolio. The three asset groups in your portfolio are:
- "Equities" (Australian shares, international shares and private equity) which are expected to provide returns in excess of cash and inflation;
- "Real assets" (property and infrastructure) which are expected to diversify equity risk in a portfolio and provide long-horizon income returns that are less sensitive to inflation risk; and
- "Interest-bearing assets" (fixed interest and cash) which are expected to diversify equity risk in a portfolio, dampen volatility and provide liquidity.
The investment strategy sets a mix of these asset groups to give a broad exposure to different risk drivers, countries, currencies, underlying businesses and types of assets. The aim of having a broad mix is to get positive returns but, at the same time, make the investment portfolio more resilient to economic and financial market shocks and so provide less volatile returns to members.
The Trustee regularly reviews the investment strategy, taking into account the current and expected market conditions, and changes to the investment mix are made when necessary. The Trustee Board or its Investment Committee usually meets every month to review the investment portfolio and consider the state of the economy and financial markets in Australia and overseas.
How the assets of MIESF MySuper are invested
The following table shows the allowable range and target allocations for each asset class in MIESF MySuper effective from 30 June 2016.
|Minimum %||Target %||Maximum %|
|Interest Bearing Assets||15||35||55|
Investment objectives for the High Growth Option
The aim of this investment option is to provide Main section members with a "high growth" fund with an exposure to Australian and International Shares and Listed Property Shares of around 90%. This option is designed to deliver higher long term returns to members, but is likely to experience significantly higher volatility than MIESF MySuper. This option may be suitable for those members who can tolerate a higher degree of risk and are prepared to have an investment horizon of at least five to seven years.
The investment objectives of the High Growth Option are:
- Provide capital growth over rolling seven-year periods measured at each 30 June; and
- Beat Inflation; that is to achieve a rate of return, which exceeds the rate of inflation (as measured by the CPI) by at least 4% per annum, after allowance has been made for tax and investment costs, over rolling ten-year periods measured at each 30 June (the long-term return objective); and
- Achieve a total return, after allowance has been made for tax and investment costs, that is greater than the median (middle ranking) return of "growth" investment options in the SelectingSuper survey, over rolling five-year periods measured at each 30 June.
There is an industry-wide "Standard Risk Measure" which measures the estimated number of negative annual returns over any 20 year period. This has been calculated at 4.4 for the High Growth Option. The Standard Risk Measure covers seven Risk Bands/Risk Labels from 1 (very low risk) to 7 (very high risk). The Risk Band for the High Growth Option is 6 (high risk).
Investment strategy for the High Growth Option
For the High Growth Option, the Trustee currently invests in the Vanguard® High Growth Index Fund. The Fund's Investment Committee and Trustee Board review the use of this fund from time to time and may vary this investment at their discretion. The Trustee sets the investment strategy in the interests of members and you have no ability to select the underlying fund.
The following table shows the allowable range and target allocations for each asset class in the High Growth Option effective from 30 June 2016.
|Minimum %||Target %||Maximum %|
|Fixed Interest - Australian||2||4||6|
|Fixed Interest - International||2||6||10|
As at 30 June 2015 and 30 June 2016 the actual asset allocations were the same as the target allocations shown above.
The target allocations have been unchanged since November 2013. The entire International Shares allocation is unhedged to foreign currencies.