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Smartsave Investment Guide 1

Smartsave ‘Member’s Choice’ Superannuation Master Plan

Investment Guide 8 April 2019

The information in this document forms part of the

Product Disclosure Statement (PDS) dated 8 April 2019

for Smartsave Employer Super and the Product

Disclosure Statement dated 8 April 2019 for Smartsave

Personal Choice & Smart Pensions.

Its purpose is to give you more information and/or

specific terms and conditions referred to in the PDS.

You should consider all that information before making

a decision about Smartsave Employer Super and/or

Smartsave Personal Choice & Smart Pensions.

If you invest in Smartsave Employer Super and/or

Smartsave Personal Choice & Smart Pensions, you can

access a copy of the relevant PDS from our website at

www.smartsavesuper.com.au.

Alternatively, you can request a copy of this

information free of charge by contacting Client

Services on

1300 654 720.

The information provided in this Investment Guide is

general information only and does not take account of

your personal financial situation or needs. You should

obtain financial advice tailored to your personal

circumstances.

Table of Contents

1. How we invest your money 3

2. Why choosing an investment strategy is important 4

3. Constructing your investment portfolio 7

4. About Smartsave investment options 8

5. Understanding Investment Risk 9

6. Risk profile of investment options 11

7. Investment menu 13

8. The investment option profiles 13

9. Indirect Cost Ratio 17

10. Glossary of investment terms 18


2 Smartsave Investment Guide

Important information

When an employer joins Smartsave Employer Super or a member joins Smartsave Personal Choice & Smart Pensions,

the employer’s nominated employees and persons applying for membership of Smartsave Personal Choice & Smart

Pensions become members of the Plan. Diversa Trustees Limited is the Trustee of the Plan and the issuer of this Guide.

An investment in Smartsave Employer Super and/or Smartsave Personal Choice & Smart Pensions is not a deposit or

other liability of the Trustee, the Custodian, the Promoter, the Administrator or their related group companies and

none of them stands behind or guarantees the capital or performance of the investment.

An investment in Smartsave Employer Super and/or Smartsave Personal Choice & Smart Pensions is subject to

investment risk, including possible repayment delays and loss of income and principal invested.

The information provided in this Guide is general information only and does not take into account your personal

financial situation or needs. You should obtain professional financial advice tailored to your personal circumstances

and to obtain a copy of the PDS for Smartsave Employer Super before making any decision about whether to acquire,

or continue to hold, the product. You can obtain a copy of the PDS by contacting Client Services on 1300 654 720.

The Plan is governed by a trust deed (Trust Deed). Together with superannuation law, the Plan’s Trust Deed sets out

the rules and procedures under which the Plan operates and the Trustee’s duties and obligations. If there is any

inconsistency between the Trust Deed and the PDS or this Guide, the terms of the Trust Deed prevail. A copy of the

Trust Deed is available from Client Services free of charge.

The Trustee is responsible for the contents of this Guide.

A reference to ‘adviser’ in this Guide means your financial adviser or the Australian financial service licensee which

your adviser represents.



1. How we invest your money

Introducing investment choice

Super is an investment for your future, so it is important to know how your account is invested, and to understand the

investment choices you have.

This Investment Guide provides you with practical information to help you tailor a personal investment strategy for

your account that will assist you in achieving your retirement goals. The Guide also provides you with detailed

information about each of the investment options offered by the Plan.

Please Note: for those members of Smartsave Employer Super who do not make an investment choice, your

account will be invested in the Growth (MySuper) investment option.

Tailoring a super investment strategy is easy

Understand why it’s important to tailor an investment strategy.

Find out what type of super investor you are - ‘risk profile of investment funds’.

Review the wide range of investment options offered.

Talk to an adviser to confirm you’re on the right track.

Login to www.smartsavesuper.com.au to review your choice.

http://www.smartsavesuper.com.au/



2. Why choosing an investment strategy is important

Super is an important financial asset. After the family home, it is likely to be your most valuable asset when you

retire. It’s important to make sure your super is appropriately invested in order to meet your financial needs in

retirement.

Most Australian workers receive an amount of 9.5% of their salary (ordinary time earnings), called the ‘Superannuation

Guarantee’ (SG), contributed to a super fund by their employer. How much super you have in retirement will depend

to a large degree on the ongoing contributions made to your super account and how your super account is invested

throughout your lifetime.

While retirement can seem a long way off, the sooner you start planning, the better off you’ll be when it does come

around.

You can switch investment options as described below

How to switch…

Log onto your Smartsave Online Portal and switch online

Complete an Investment Switch form - this is available online at www.smartsavesuper.com.au or you can contact

Client Services on 1300 654 720 and they will forward one to you.

The completed form can either be emailed to us at [email protected], or posted to:

Smartsave

PO Box 1282

Albury NSW 2640

You can switch as many times as required as your needs change.

Depending on the investment option, some withdrawal conditions may apply to the switch.

The importance of personal financial advice

Your superannuation is likely to be your major source of retirement income so you need to consider your investment

decisions carefully.

We recommend that you obtain professional financial advice from an appropriately licensed or authorised adviser. An

adviser can determine a range of investment options that suit your personal situation. There are, however, a number

of questions you can ask yourself to help identify the sort of investor you are and the options that may meet your

needs. We have set out these questions below for you.

Some questions to ask before making any decision about investing

Investment goal What sort of income do I need/want in retirement?

Timeframe How much time is there until I intend to retire and access my superannuation benefit?

How long do I need my superannuation savings to last in retirement?

Risk What level of risk am I comfortable with?

Diversification How might I diversify my investment?

Investment options

What investment option(s) will I select to achieve my goals? This will involve considering the objectives and strategy of each investment option which will cover issues like potential returns, asset classes in which the investment option invests and the level of risk

to which your benefit will be exposed.

Adviser Have I discussed the possible choices with my adviser?


mailto:[email protected]



What do all these investment terms mean?

Understanding investment terms is an important step in choosing the investment options that most closely meet your

investment goals. To assist you we have included a glossary of commonly used investment terms on pages 18 to 19 of

this Guide.

Time to invest

The amount of time you intend to invest is a key factor when making your investment decisions. Investment markets

move up and down over time, and the value of your investment will move with them. For example, growth asset

classes such as shares and listed property trusts usually offer higher returns over the long term, but returns tend to be

more variable (that is, volatile) relative to defensive asset classes such as cash and fixed interest. If you want to

access your funds in the near future, you might prefer investment options which have lower exposure to shares and

usually less volatility. This will normally give you greater protection against capital loss in the short term. The reverse

is generally true if you are looking for a longer term investment – in this case, exposure to more volatile markets over

the long-term improves the possibility of capital growth.

When choosing your investment options, you should consider the suggested minimum timeframe for each option to

help reduce the chance of receiving a negative return. Note that these are suggestions of a general nature only. How

appropriate the suggestions are may change over time in line with investment markets, your specific circumstances

and other factors.

Superannuation is a long term investment. The investment timeframe does not necessarily stop at your retirement

date. Superannuation monies may continue to be invested after your retirement date to generate an income for your

retirement as illustrated in the following diagram.

Note: The diagram does not take consideration of the investment performance, it only assumes ongoing regular

contributions.

Your attitude to risk

Are you comfortable with the possibility of receiving low or negative returns in the short term in order to possibly

obtain higher returns over the long term? Or would you be more comfortable with generally moderate but consistent

returns? Your attitude to the risk of receiving a negative return at any time is one of the most important factors to

consider before investing.

To help make it easier for you to choose the investment option(s) which closely match your attitude to risk we have

provided information about the risk/return profile of each investment option on pages 13 to 16 of this Guide. More

information on the historical relationship between risk and return as well as the specific risks that attach to individual

asset classes such as shares and property can be found on pages 9 and 10 of this Guide (see ‘Understanding investment

risk’).



Diversification

Diversification simply means ‘not putting all your eggs in the one basket’. Spreading your investment over a number

and variety of asset classes can reduce risk. Each asset class has its own level of risk. The value of different assets

generally rise and fall at different times. Diversification can help minimise the impact of any single investment or asset

adversely affecting the value of your whole investment.

It is important to know in what asset classes your retirement savings are invested. It is also important to understand

the differences between the diversified investment options and single sector investment options. The Plan offers 3

single sector investment options as follows:

1. Cash

2. Australian Shares

3. International Shares

Single sector investment options invest in one asset class only. Subject to exceptions (e.g. Cash Option), single sector

investment options can increase risk due to investments not being spread across asset classes.

The Plan offers 4 diversified investment options as follows:

1. Moderate

2. Balanced

3. Growth

4. Diversified Shares

In addition, for those members of Smartsave Employer Super who do not make an investment choice there is a further

diversified investment option, i.e. Growth (MySuper).

Diversified investment options invest in a range of asset classes. The level of risk of each investment option varies

according to the type and proportion of asset classes held in that option.

If you are invested in one or more of the diversified investment options you are letting the underlying manager decide

on the asset allocation for you. That is, the underlying manager decides which sectors to invest in and in what

proportions. The underlying manager typically spreads investments across a range of asset classes including shares,

property, fixed interest and cash.

On the other hand, if you invest in one or more single sector investment options, you are opting to decide the asset

allocation for yourself and the risk profile of your own total superannuation investment portfolio. It is up to you to

change the proportions invested in each sector to diversify your portfolio and achieve your investment goal.

The investment options add an additional element of diversification. Each investment option consists of various

underlying investments. For example, an investment in the Smartsave Cash Option is not 100% an investment directly

in cash. It will also include investments in managed funds which invest in cash.

Regularly review your investment goal and strategy

As life changes, so do your investment and retirement goals. Periodically you should make sure that your goals and the

investment options that you are using to achieve them are still aligned. With Smartsave you can change your

investment options, contribution levels, and in the case of Smart Pensions your pension payments at any time to

maintain momentum towards your goals. No switching fees apply (however, transaction fees may apply).

We regularly review the menu of investment options available to help ensure that you have a range of quality

investment options from which to choose. The Trustee retains the right to close investment options at any time.

Tell us about your changed investment choice

Once you have reviewed your investment choices don’t forget to put your strategy in place. You can make your

investment choice via the Member Online or by completing an Investment Switch form.



3. Constructing your investment portfolio

In conjunction with your Adviser it is important that you follow the following steps:

Define your objectives

What type of investments do you need to achieve these

objectives?

Select either one or a combination of the following

Diversified investment options

Single sector investment options

As explained on page 6, except for cash, single sector investment options

can be high risk.

Single Sector Investment Options can be mixed in order to increase

diversification.



4. About Smartsave investment options

Professionally constructed investment options

All investment options within Smartsave are constructed with underlying managed funds. Managed funds provide an

easy, simple and convenient method for diversifying your superannuation investment. The investments utilised in the

investment options may change from time to time at the discretion of the Trustee (without prior notice to you). Any

investments shown for the investment options in this document are for illustrative purposes only and are not intended

to indicate any ability on the part of members to select the underlying investments.

Details for each of Smartsave’s investment options can be found in ‘Smartsave’s investment options’ commencing on

page 13 of this Guide.

There is a further investment option, i.e. Growth (MySuper), but this is only available to those members of Smartsave

Employer Super who do not make an investment choice. Details of the Growth (MySuper) investment option can be

found on page 15. Please Note: this option is only available as a default investment in Smartsave Employer Super and

does not form part of the ‘choice’ investment menu.

How are Smartsave’s investment options managed

The Trustee (with the assistance of an Asset Consultant) regularly reviews the investment options. To ensure that they

retain their integrity, the Trustee may make changes to them over time.

Updated information on Smartsave investment options can be obtained from Smartsave’s website at

www.smartsavesuper.com.au.

If you do not have access to the Internet, the updated information can be obtained by contacting Client Services on

1300 654 720. This information will be provided to you in hard copy free of charge upon Client Services receiving your

request.




5. Understanding Investment Risk

Understanding investment risk and your investment timeframe is the key to successfully developing your investment

strategy.

It is important for you to appreciate that your investment in Smartsave is not guaranteed. The value of your

investment can rise or fall.

The significant risks of investing

Different investments have different levels of risk. Risk can be defined as the probability that you lose capital, do not

receive income, or are not able to transact on your account over a given period.

The value of an investment in your account can never be quarantined from risk. However, the nature and level of risk

associated with your investments will depend on which investment option(s) you choose and your personal

circumstances.

Types of risks

Some factors that affect the performance of the investments held within your account include:

Economic and political risks

Changes in monetary policy, taxation policy and other laws

The general state of domestic and world economies.

Equity investments are exposed to specific risks, including:

Company specific risk, where unexpected change impacts upon the value of a specific share or security

Trends in the industries in which the investments are made

Liquidity risks associated with abnormal market conditions

Currency risk associated with movements in exchange rates.

Geared investments

A geared investment is essentially an investment which involves some form of borrowing to purchase additional assets.

By adding borrowed funds to your own funds, this increases both your total investment and your potential for higher

returns.

However you should always remember that when using geared investments not only are potential returns magnified but

the potential for greater losses, if the investment does not perform as expected, is also magnified.

Fixed interest investments are exposed to specific risks, including:

Interest rate risk and a resulting variability in earnings due to the fluctuation in interest rates and inflation

Credit risk, which is the risk that securities will not repay interest or capital.

Property risks are exposed to specific risks, including:

Supply and demand for the underlying properties

Levels of rental income

Global social and political factors

Movements in currency exchange rates.

Alternative investments

Risks associated with alternative investments depend on the nature of the alternative investments and include changes

in monetary policy, taxation policy and other laws, company specific risk, where unexpected change impacts upon the

value of a specific share or security and interest rate risk and a resulting variability in earnings due to the fluctuation

in interest rates and inflation. Risk can be controlled by limiting exposure to individual investments and seeking

diversification of alternative asset opportunities. Examples of alternative investments are:

Private equity

Leveraged leases

Direct property and property related investments (e.g. infrastructure assets)

Commodities.



Derivatives

The investment options may also have an exposure to financial derivatives, such as futures, funds, or other derivative

contracts to gain exposure to investment markets and manage the risk associated with market prices, interest rates

and currency fluctuations.

Derivatives may also be used to gear an investment option.

Risks associated with derivatives depend on the nature of the derivatives and include changes in monetary policy,

taxation policy and other laws, company specific risk, where unexpected change impacts upon the value of a specific

share or security and interest rate risk and a resulting variability in earnings due to the fluctuation in interest rates

and inflation.

Technology risks

Should there be a failure in computer systems generally, or those used by the Trustee or its service providers then

delays in the processing of investment transactions or the delivery of reports to investors may occur. The resulting

delays may have an impact on investments.

Operational risks

When you invest in a super fund you also rely on the quality of the personnel and systems utilised to manage its

investments. If key personnel leave or there is a material failure in administrative systems, your investment may be

materially affected.

Changes in your personal circumstances can also affect the suitability of an investment, such as changes in your

investment

objectives, your personal financial situation and individual needs.

Neither the Trustee nor any of its service providers guarantee the performance of any of Smartsave’s investment

options, the return of capital, payment of income, or any particular rates of return. Past performance is not a

guarantee of future performance.

Investment in the range of investment options available in Smartsave carry different investment risks depending on the

nature of the underlying investments (including asset classes invested in).

We recommend that you read the relevant PDS in full and consult your adviser to assess the risks of investment and the

suitability of the account or investment options to your needs. The risks outlined in this section are a guide only and

not exhaustive. Your Adviser can provide you with advice about how these risks may affect you.

What does investment risk mean to you?

Risk has traditionally meant the ups and downs on investment returns or the possibility of you losing some or all of your

money. One of the greatest risks is the likelihood that your investment goals will not be achieved.

Investments that provide the potential for higher returns tend to produce greater variability in the short term. These

investments are generally described as more risky as there is a higher chance of losing money but they can also give

you a better chance of achieving your long term goals.

Investments that provide more stable returns and less chance of you losing money are considered to be less risky, but

may not provide sufficient long-term returns for you to achieve your investment goals.

Selecting investments that best meet your investment needs and timeframe is crucial in managing investment risk.

Environmental, social and ethical factors and labour standards considerations

The Trustee does not take into account environmental, social or ethical considerations or labour standards for the

purpose of selecting, retaining or realising investments.

The underlying fund managers for the investment options may have their own policies concerning labour standards or

consideration of an environmental, social or ethical nature. To the extent the underlying managers take into account

such policies they do so in their own right and not on behalf of the Trustee.



6. Risk profile of investment options

There is a relationship between the amount of risk that you are willing to take and the potential return on your

investment. In general, investment strategies that earn higher returns, carry the highest risk. Not only can the rate of

return fluctuate, but also the value of your capital can rise or fall. For investment options that generally earn lower

returns, the capital value is less likely to fluctuate.

In summary, investments that have a higher risk of losing money in the short or medium term may result in you

achieving higher returns in the long term. You should consult your adviser to assess the risks of investments in

Smartsave and their suitability to your investment goals.

Standard risk measure

When determining the risk level of each of the investment options, the Trustee has adopted the Standard Risk Measure

approach.

The Standard Risk Measure is based on industry guidance to allow you 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 you may require to

meet your objectives. Further, it does not take into account the impact of administration fees and tax on the

likelihood of a negative return.

You should ensure that you are comfortable with the risks and potential losses associated with your chosen investment

options. The Standard Risk Measure is determined by the following table:

Risk band Risk label Estimated number of negative annual returns over any 20 year period

1 Very Low Less than 0.5

2 Low 0.5 to less than 1

3 Low to Medium 1 to less than 2

4 Medium 2 to less than 3

5 Medium to High 3 to less than 4

6 High 4 to less than 6

7 Very High 6 or greater

How should you determine your investment timeframe?

Although we outline minimum investment timeframes for certain investment options based on generally accepted

views about the nature of particular investments, you should regularly review your investment decision with your

adviser because your investment needs or market conditions may change over time. The minimum timeframes are a

general guide only and should not be considered personal investment advice because they do not take into account

your personal circumstances.

Smartsave’s investment options

The Smartsave investment options are selected after considerable research. You can invest in any one of the

investment options or you can choose to spread your investment across a number of options.

If you leave Smartsave or withdraw moneys from any one or more investment options at any time after joining, you

may get back less than the amount of contributions paid because of the level of returns earned by the investment

options (including negative returns), Smartsave’s fees and costs and taxation paid on your contributions.

There is no minimum investment and no minimum for subsequent amounts invested, switches or withdrawals.

Investment menu

The full investment menu of diversified investment options and single sector investment options at the date of issue of

this document is set out on page 13 of this Guide.



Past investment performance

Please note the investment performance quoted is based on the movement of unit prices within Smartsave and takes

into account some relevant fees, costs and taxes (but not all fees, costs and taxes). Investment performance for the

Smart Pensions product is shown separately because of the different tax treatment that applies to this product.

Up to date investment performance for each investment option is available from Smartsave’s website at

www.smartsavesuper.com.au or via the Member Online. If you do not have access to the Internet, the updated

information can be obtained by contacting Client Services on 1300 654 720. This information will be provided to you in

hard copy free of charge upon Client Services receiving your request.

Past performance should not be taken as an indication of future performance. You should not base your decision

to invest in a particular investment strategy based on past performance.




7. Investment menu

Smartsave offers below investment options:

Cash

Moderate

Balanced

Growth

Australian Shares

International Shares *

Diversified Shares *

In addition to above there is a default investment option:

Growth (MySuper)

* only available for members in the employer sponsored and the personal divisions, not available for members in Smart

Pensions.

8. The investment option profiles

Below provides you with information on each investment option in a standard format to help you compare and select

those options that may be most suitable to your personal investment objectives and strategy. This guide does not take

into account your personal investment objectives, financial situation or particular needs. We recommend you seek

professional financial advice from an appropriately licensed or authorised adviser before making any investment

decision.

Summary of the Cash Investment Option

Who is this investment option for? Members who prefer low risk and a high level of security on their account balance.

Investment return objective Bloomberg AustBond BB Index

Minimum suggested time frame 1 years

Standard risk measure Very low

Asset classes Strategic asset allocation Asset allocation range

Defensive Assets 100.0%

Cash 100.0% 100.0%

Australian Fixed Income 0.0% 0.0%

Global Fixed Income 0.0% 0.0%

Growth Assets 0.0%

Australian Equities 0.0% 0.0%

International Equities 0.0% 0.0%

Global Listed Property & Infrastructure 0.0% 0.0%



Summary of the Moderate Investment Option

Who is this investment option for? Members who seek exposure to mainly defensive assets and can tolerate a moderate level of risk over three years. This option invests predominantly in defensive assets across most asset classes.

Investment return objective CPI + 0.5%


Standard risk measure Medium



Cash 24.5% 12.5%-50.0%

Australian Fixed Income 26.0% 15.0%-40.0%

Global Fixed Income 19.5% 10.0%-30.0%

Growth Assets 30.0%

Australian Equities 13.0% 5.0%-20.0%

International Equities 14.5% 5.0%-25.0%

Global Listed Property & Infrastructure 2.5% 0.0%-15.0%

Summary of the Balanced Investment Option

Who is this investment option for?

Members who seek exposure to a combination of growth and defensive assets and can tolerate a medium to high level of risk over four years. This option invests predominantly in a mixture of growth and defensive assets across most asset classes.



Standard risk measure Medium to High



Cash 11.0% 5.0%-20.0%



Growth Assets 50.0%






Summary of the Growth Investment Option

Who is this investment option for? Members who seek exposure to mainly growth assets and can tolerate a high level of risk over five years. This option invests mainly in growth assets across most asset classes.



Standard risk measure High



Cash 6.5% 2.0%-15.0%



Growth Assets 70.0%




Summary of the Growth (MySuper) Investment Option

Who is this investment option for? Members who seek exposure to mainly growth assets and can tolerate a high level of risk over ten years. This option invests mainly in growth assets across most asset classes.






Cash 6.5% 2.0%-15.0%



Growth Assets 70.0%






Summary of the Australian Shares Investment Option

Who is this investment option for? Members who seek exposure to a broad range of companies listed on the Australian Stock Exchange across large and small capitalisation companies with a mix of index and active management.

Investment return objective S&P/ASX 300 Accumulation Index

Minimum suggested time frame n/a




Cash 2.0% 0.0%-10.0%



Growth Assets 98.0%


International Equities 0.0% 0.0%


Summary of the International Shares Investment Option

Who is this investment option for? Members who seek exposure to companies listed on international exchanges across developed and emerging markets with a mix of index and active management.

Investment return objective MSCI World (ex Aust) Index in $A

Minimum suggested time frame n/a




Cash 2.0% 0.0%-10.0%



Growth Assets 98.0%

Australian Equities 0.0% 0.0%



Summary of the Diversified Shares Investment Option

Who is this investment option for? Members who seek exposure to Australian and international listed companies with a mix of index and active management.






Cash 2.0% 0.0%-10.0%



Growth Assets 98.0%






9. Indirect Cost Ratio

The Indirect Cost Ratio (ICR) forms part of the total cost of your super listed in the Member Guide which form part of

the PDS. In order to calculate the total fees and costs applicable to your super, you should also take into account the

fees and costs outlined in the Member Guide.

The ICRs listed in the tables below are current at the time of preparation of this Guide.

Investment Option Indirect Cost Ratio (p.a.) Buy/Sell Spread

Buy Sell

Cash 0.30% 0.00% 0.00%

Moderate 0.40% 0.20% 0.10%

Balanced 0.46% 0.25% 0.10%

Growth 0.46% 0.25% 0.10%

Australian Shares 0.46% 0.25% 0.15%

International Shares 0.47% 0.25% 0.10%

Diversified Shares 0.50% 0.30% 0.10%

Growth (MySuper) 0.46% 0.10% 0.10%



10. Glossary of investment terms

The glossary contains an explanation of commonly used investment terms used in this document. If you would like

information about any other terms used in this Guide, please contact Client Services on 1300 654 720.

Asset Allocation – the distribution of investments among various asset classes or sectors (the major asset classes are

shares, property, fixed interest and cash).

Asset Class – a category of financial assets. The major asset classes are shares, property, fixed interest and cash,

which in turn can be broken down further to include domestic or international shares, domestic or international fixed

interest, direct or indirect property investments, etc. All asset classes have different risk and return characteristics.

Benchmark – the target asset allocation applying to the benchmark portfolio. Typically, it is the asset allocation which

the underlying manager has decided is most appropriate for the fund to meet its investment objectives over the long

term.

Capital Growth – an increase in the market value of an asset.

Cash – one of the four broad investment categories. Cash includes investments made in the short term (i.e. up to 12

months) money markets (e.g. bank bills, treasury notes, and similar securities which have a short term investment

timeframe).

Defensive Assets – asset classes which generally have a lower volatility than growth assets (e.g. cash and fixed

interest).

Derivatives – these are investments whose value is derived from other assets, such as shares, and may be used as part

of the portfolio management process. Futures contracts and funds are examples of derivatives. Derivatives may be

used to reduce risk and can act as a hedge against adverse movements in a particular market and/or in the underlying

asset. Derivatives can also be used to gain exposure to assets and markets. While derivatives offer the opportunity for

significantly higher gains from a smaller investment (because of the effective exposure obtained) they can also

produce significantly higher losses, sometimes in excess of the amount invested. Fund managers are required to have

strict policies and procedures on the use of derivatives.

Diversification – spreading investments over a number of individual assets, classes of assets, countries or fund

managers, in order to reduce total risk.

Diversified Investment Option – the investments are constructed from a mix of assets from different asset classes.

Earnings – earnings refers to the returns on an investment made up of income plus capital growth/losses (e.g. the

earnings on a share comprises the dividend distributions, if any, plus capital gains or losses).

Equity – can be used interchangeably with ‘company share’.

Exchange Rate – the rate at which one currency can be traded for another.

Exchange or Currency Risk – the risk that the value of an offshore investment may be affected by adverse movements

in exchange rates.

Fixed Interest Securities – represent loans to borrowers such as governments, banks or companies who may be

financing investment projects. They include bonds and structured finance products. The borrower generally pays a pre-

determined rate of interest for an agreed term. When the term has expired the fixed interest security may be

redeemed for cash.

Gearing – also known as leveraging or borrowing. An investor gearing into an investment is borrowing to invest.

Growth Assets – assets which have the potential to achieve capital growth over the medium to long term; primarily

regarded as shares and property.

Hedge – an investment position adopted to counter-act, or at least reduce, the risk of another position. As a form of

insurance, the term is common in futures and foreign exchange markets or whenever a risk-management technique is

used to protect against future price variations. Practicing this form of investment is called hedging, and contrasts with

speculating.

Indirect Cost Ratio - is the ratio of the total of the indirect costs for the MySuper product or investment option, to the

total average net assets of the superannuation entity attributed to the MySuper product or investment option.

Investment Objectives – the investment result aimed to be achieved over a nominated time frame.

Listed Property Securities – are generally shares in companies where the majority of earnings are sourced from

property or property-related activities, including the ownership, development or management of property assets.



Long Term – in investment terms, long term is generally said to be in excess of five years. However, there is no exact

definition.

Option – a contract which gives the holder the right, but not the obligation, to buy or sell a commodity or security

during a given time frame.

Overweight – where the manager includes more of an asset class (or of a type of security, or of a particular security)

than is desirable, or than was anticipated in the benchmark portfolio.

Property – includes residential, commercial and industrial property. Investments in property may be made directly or

indirectly via property trusts or by buying shares in property companies which may be listed on a stock exchange.

Property trusts and companies can invest into shopping centres, office towers, hotels and factories or into unlisted

property investment vehicles such as private equity vehicles, mortgage securities and mortgage trusts. Property can

produce a return in the form of capital growth (from the rising value of the investment) and income (typically from

rent).

Single-Sector Investment Option – the investments are constructed from a single asset class only

Shares – represent a part ownership in a company and are also known as equity. Investors are entitled to share in the

future of that company, which may include the receipt of income (dividends), as well as the potential for capital gains

if the share price rises.

Volatility – the extent to which share prices, bond prices, interest rates, investment returns, etc., change from their

trend growth rate over time. Volatility is a commonly used way of measuring the risk of an asset, on the basis that the

more volatile an investment, the greater the chance that the actual return will be different to the expected return

and therefore the higher the risk.



Phone 1300 654 720

Email [email protected]

Website www.smartsavesuper.com.au

Mail Smartsave

PO Box 1282, Albury NSW 2640

mailto:[email protected]


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