Investment changes - Fund manager for the Ethically Minded option, updated Strategic Asset Allocations (SAA) and investment objectives

May 09 2021

Effective 11 January 2021, changes will be made to some of the investment options available to ESSSuper members in the Accumulation Plan, Beneficiary Account, Working Income Stream and/or Retirement Income Stream.

Change Impact of the change
1. Changes to Ethically Minded investment option

Effective 11 January 2021, the ESSSuper Board has approved the appointment of Pendal Fund Services Limited (Pendal) as the sole investment manager of the Ethically Minded option. From that date, all new and existing proceeds for the Ethically Minded option managed under the interim arrangements will be transferred across to be managed by Pendal.

2. Changes to Strategic Asset Allocations (SAA) and investment objectives

Effective 11 January 2021, changes will be made to the strategic asset allocations and investment objectives for some investment options available to ESSSuper members in the Accumulation Plan, Beneficiary Account, Working Income Stream and/or Retirement Income Stream.

1. Changes to Ethically Minded investment option

After considering a range of alternative investment managers for the Ethically Minded option, the ESSSuper Board has approved the appointment of Pendal Fund Services Limited (Pendal) as the sole investment manager of the Ethically Minded option effective 11 January 2021.

From 11 January 2021, all new and existing proceeds for the Ethically Minded option managed under the interim arrangements will be transferred across to be managed by Pendal. Please refer to the Additional information section below for the Strategic Asset Allocations and the asset class ranges of the Ethically Minded option to be managed by Pendal.

The investment fee for members in the Ethically Minded option temporarily decreased from 0.73% to 0.47% when AMP Capital was terminated. Investment fees will further decrease from 0.47% to 0.38% when Pendal is appointed on 11 January 2021.

Should you wish to change your asset allocation selection, please login to your Members Online account or complete an Investment Options Change form (E146), available on our forms page, and return it to us.

 

2. Changes to Strategic Asset Allocations (SAA) and investment objectives

Effective from 11 January 2021, the SAA and the asset class ranges for High Growth, Growth, Basic Growth, Balanced, Conservative, and Defensive investment options will be adjusted. The new SAAs are expected to increase the likelihood of all investment options meeting their risk and return objectives. Please refer to the Additional information section below for further details.

Change to investment objective – Defensive option

The ESSSuper Board annually reviews the Fund’s investment strategy, which includes consideration of the appropriateness of each investment option’s risk and return objectives. At the last investment strategy review, the Board approved a lower return objective and higher risk band for the Defensive option.

Accumulation Plan, Beneficiary Account, and Income Stream (Working Income Stream)

The Defensive option’s return objective decreased from CPI + 1.0% to CPI + 0.5% and the risk band increased from 1 – VERY LOW to 2 – LOW. The lower return objective and higher risk band reflects specialist advice from the Fund’s Investment Advisor, who estimates lower returns and slightly higher risks for investors in cash and fixed income markets, which form a major portfolio allocation for the Defensive option.

Defensive To 10 January 2021 From 11 January 2021
Objective CPI + 1% p.a. over 2 year period CPI + 0.5% p.a. over 2 year period
Risk Band 1 - VERY LOW 2 - LOW

Income Stream (Retirement Income Stream)

The Defensive option’s return objective decreased from CPI + 1.5% to CPI + 1.0% and the risk band increased from 1 – VERY LOW to 2 – LOW. The lower return objective and higher risk band reflects specialist advice from the Fund’s Investment Advisor, who estimates lower returns and slightly higher risks for investors in cash and fixed income markets, which form a major portfolio allocation for the Defensive option.

Defensive To 10 January 2021 From 11 January 2021
Objective CPI + 1.5% p.a. over 2 year period CPI + 1% p.a. over 2 year period
Risk Band 1 - VERY LOW 2 - LOW

Change to investment objective – Cash option

The ESSSuper Board annually reviews the Fund’s investment strategy, which includes consideration of the appropriateness of each investment option’s return objectives. At the last investment strategy review, the Board approved a lower return objective for the Cash option.

Accumulation Plan, Beneficiary Account, and Income Stream (Working Income Stream)

The Cash option’s return objective changed from the Reserve Bank of Australia’s (RBA) Cash Rate Target to the Bloomberg AusBond Bank Bill Index. The new objective better reflects the prospective returns available to cash investors. Returns from cash investments recently declined below the RBA Cash Rate Target, driven by the RBA’s intervention in cash markets to stimulate the Australian economy in the aftermath of the Coronavirus outbreak.

Cash To 10 January 2021 From 11 January 2021
Objective To provide a return after fees (but before tax) equivalent or higher than the RBA Cash Rate. To provide a return after fees (but before tax) equivalent or higher than the Bloomberg AusBond Bank Bill Index.

Income Stream (Retirement Income Stream)

The Cash option’s return objective changed from the RBA Cash Rate Target to the Bloomberg AusBond Bank Bill Index. The new objective better reflects the prospective returns available to cash investors. Returns from cash investments recently declined below the RBA Cash Rate Target, driven by the RBA’s intervention in cash markets to stimulate the Australian economy in the aftermath of the Coronavirus outbreak.

Cash To 10 January 2021 From 11 January 2021
Objective To provide a return after fees equivalent or higher than the RBA Cash Rate. To provide a return after fees equivalent or higher than the Bloomberg AusBond Bank Bill Index.

Defensive Fixed Income asset class

The Fund is also making enhancements to the Sovereign Bonds asset class, which will be renamed Defensive Fixed Income effective 11 January 2021. Historically the Sovereign Bonds asset class has exclusively comprised investments in government debt. The forward-looking return prospects of these investments have declined to very low levels. The new asset class structure will introduce investments in low risk, alternative debt investments where return prospects have not been as impacted by recent market conditions.


Additional information

Strategic Asset Allocation (SAA) Changes for Accumulation Plan, Beneficiary Account, and Income Streams

Effective from 11 January 2021 the Strategic Asset Allocation and the asset class ranges will be adjusted for the High Growth, Growth, Basic Growth, Balanced, Conservative, Defensive, and Ethically Minded investment options of the Accumulation Plan, Beneficiary Account, and Income Streams as follows:

High Growth investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 28.0 10 - 40 29.5 10 - 40
International Shares 41.5 20 - 55 42.0 20 - 55
Private Equity 0.0 0 - 10 0.0 0 - 10
Property 9.0 0 - 30 7.0 0 - 30
Infrastructure 12.5 0 - 30 13.0 0 - 30
Alternative strategies 5.0 0 - 15 4.5 0 - 15
Multi-asset strategies 0.0 0 - 20 0.0 0 - 20
Credit 4.0 0 - 15 4.0 0 - 15

Growth investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 19.0 5 - 30 21.0 5 - 30
International Shares 24.0 10 - 40 26.0 10 - 40
Private Equity 0.0 0 - 10 0.0 0 - 10
Property 10.0 5 - 15 9.0 0 - 20
Infrastructure 10.0 0 - 15 12.0 0 - 25
Alternative strategies 6.5 0 - 15 4.0 0 - 15
Multi-asset strategies 4.0 0 - 25 4.0 0 - 25
Credit 13.5 0 - 30 12.5 0 - 30
Defensive fixed income 8.5 0 - 20 8.0 0 - 20
Cash 4.5 0 - 15 3.5 0 - 15

Basic Growth investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 25.0 5 - 35 26.5 5 - 35
International Shares 36.5 10 - 50 37.5 10 - 50
Private Equity 0.0 N/A 0.0 N/A
Property 8.0 5 - 15 7.0 0 - 20
Infrastructure 10.0 0 - 15 11.0 0 - 25
Alternative strategies 0.0 0 - 10 0.0 0 - 10
Multi-asset strategies 2.0 0 - 30 0.0 0 - 30
Credit 7.5 0 - 25 7.5 0 - 25
Defensive fixed income 8.5 0 - 20 7.5 0 - 20
Cash 2.5 0 - 15 3.0 0 - 15

Balanced investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 14.0 5 - 25 11.5 5 - 25
International Shares 16.5 5 - 30 20.0 5 - 30
Private Equity 0.0 0 - 10 0.0 0 - 10
Property 9.0 5 - 15 9.0 0 - 20
Infrastructure 9.0 0 - 15 11.5 0 - 25
Alternative strategies 5.5 0 - 15 4.5 0 - 15
Multi-asset strategies 7.0 0 - 25 5.0 0 - 25
Credit 13.0 0 - 30 12.5 0 - 30
Defensive fixed income 16.0 5 - 40 16.0 5 - 40
Cash 10.0 0 - 25 10.0 0 - 25

Conservative investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 6.0 0 - 15 6.0 0 - 15
International Shares 9.0 0 - 15 10.5 0 - 15
Private Equity 0.0 0 - 5 0.0 0 - 5
Property 7.0 2.5 - 12.5 6.0 0 - 15
Infrastructure 6.5 0 - 15 9.0 0 - 20
Alternative strategies 2.0 0 - 6 0.0 0 - 6
Multi-asset strategies 11.0 0 - 30 11.0 0 - 30
Credit 9.0 0 - 15 9.0 0 - 15
Defensive fixed income 12.5 0 - 30 15.0 0 - 30
Cash 37.0 30 - 60 33.5 15 - 55

Defensive investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 3.0 0 - 10 3.0 0 - 10
International Shares 4.0 0 - 10 5.0 0 - 10
Private Equity 0.0 N/A 0.0 N/A
Property 3.0 0 - 10 3.0 0 - 10
Infrastructure 4.0 0 - 10 4.0 0 - 10
Alternative strategies 0.0 N/A 0.0 N/A
Multi-asset strategies 7.0 0 - 25 7.0 0 - 25
Credit 5.0 0 - 10 5.0 0 - 10
Defensive fixed income 13.0 0 - 40 25.0 0 - 40
Cash 61.0 50 - 90 48.0 30 - 80

Ethically Minded investment option

  To 10 January 2021 From 11 January 2021

SAA (%) Ranges (%) SAA (%) Ranges (%)
Australian Shares 26.4 15 - 40 26.0 15 - 50
International Shares 34.4 15 - 48 34.0 15 - 50
Property 7.0 0 - 20 5.0 0 - 20
Infrastructure 7.0 0 - 7 0.0 0 - 20
Alternative strategies 4.8 0 - 6 5.0 0 - 20
Multi-asset strategies 0.0 N/A 10.0 0 - 20
Credit 9.9 0 - 18 0.0 0 - 20
Defensive fixed income 7.7 0 - 27 15.0 0 - 30
Cash 2.8 0 - 20 5.0 0 - 20

 

Investment returns cannot be guaranteed as investment markets can be volatile. As a consequence, returns can be positive or negative. Past investment performance is not a reliable indicator of future performance. Benefits in ESSSuper’s Accumulation Plan, Income Streams, and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper, and ESSSuper does not come under the jurisdiction of the Australian Financial Complaints Authority. For more information about investments please refer to the relevant Product Disclosure Statement (PDS) and incorporated Investment Guide available at esssuper.com.au/pds