Conservative option

Please read all of the following information about this investment option.

General aim
To maximise long term investment returns subject to constraints aimed at limiting the risk of loss of capital.

More specifically, the investment objective of the Conservative option is to achieve net returns that exceed CPI increases by at least 1.5% pa over rolling three year periods.

Comparison with other choices
The Conservative option offers the likelihood of lower longterm investment returns and fewer fluctuations from year to year than the Moderate, Assertive, Aggressive or share options. 

It is possible that your super can reduce in value in a particular year, but that is less likely with the Conservative option than with all other options except for the Enhanced cash option. The probability of this option earning a negative return is approximately one year in nine.

Where the money is invested
The investment benchmark of the Conservative option is 30% in growth assets such as property and shares and 70% in defensive assets such as fixed interest and cash.

Benchmark holdings 

Asset class Benchmark (%) Permitted range (%)
Australian shares 12 4-20
Overseas shares 9 0-15
Property 6 0-10
Alternatives (Growth) 3 0-10
Total Growth Assets 30 35-45
Fixed interest 35 30-60
Cash 25 10-40
Alternatives (Defensive) 10 0-20
Total Defensive Assets 70 55-65

The allocations specified in the Benchmark column will be targeted, although any allocation may be within the permitted range.

What are the investments within 'alternative' assets?
Within the 'alternatives' asset class are different types of investments.  Broadly these are categorised as follows:
- Private equity (Growth asset);
- Infrastructure equity (Growth asset);
- Infrastructure debt (Growth or Defensive asset depending on structure and gearing);
- Hedge fund, single or constrained number of strategies or largely directional (Growth asset);
- Hedge fund, diversified fund of funds or multi-strategy with conservative management (Growth asset);
- Non-core property (Growth asset);
- Commodities trading (Growth asset);
- Distressed debt (will depend on the manager process and sector but tending to Growth asset).

Suitability
Many investors in this option are likely to be looking for lower volatility in returns whilst being prepared to expose some part of their superannuation to growth assets. They know long-term investment returns are likely to be lower than the Moderate, Assertive, Aggressive and shares options and that there is less chance of the value of their superannuation reducing in the short term than under the Moderate, Assertive, Aggressive and shares options.

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