Your Investment Strategy
Your Fund must have an investment strategy that is based on the objectives your Fund seeks to achieve. As your Fund’s Trustee, you must formulate and implement this investment strategy.
Issues to consider when formulating your Fund’s investment strategy include:
- The risk and likely return from the types of assets held;
- Diversification (the range and types of investments within the portfolio);
- Liquidity of investments (the ease with which they can be converted to cash); and
- The maintenance of a cash component to meet Fund expenses.
An investment strategy for a super fund should be developed in the same way as an investment strategy in any financial plan, that is, by considering the risk tolerance levels of the members and meeting their medium to long term objectives. Typically, this will lead to the Fund adopting asset allocation ranges (limits on the different assets types) within which the Fund’s investments will be made.
Care needs to be taken to ensure that your investment strategy includes adequate liquidity for recurring costs such as pension payments. Factors to consider include the level of income being generated from the assets and the level of fees, tax, and expenses that the Fund has to pay. We suggest that a Fund should maintain cash holdings of a minimum of 2% of the fund size, or $10,000, to allow for payments to be met without the need to redeem investments.
Selecting your investments
You should not make contributions or rollovers to your Fund until an investment strategy is in place. Trustees must make sure all investment decisions are made in accordance with the documented Investment Strategy of the Fund.
Disclosures for your investments
Some investments may require a disclosure document, which your adviser will provide when they make investment recommendations to you.