Shares are also known as equities or stocks. Companies issue shares to raise money. In exchange, the investor receives part ownership in the company and is entitled to a portion of the profits, usually paid as a dividend. As the company grows, profits are expected to grow and the value of the shareholder’s investment is also expected to rise. Most superannuation funds offer shares as one of the investment options you can choose. You will see shares as a type of investment or asset class, and it is typical to see a mix of both Australian and International shares in a fund.
Return on investment
Return on investment or ROI is a measure of the return earned on an investment relative to its cost. The return on investment for a superannuation investment option is expressed as a percentage over a time period such as 1 year, 5 years or 10 years.
An investment is an allocation of money you make now with the expectation of receiving a benefit in the future. Money in your superannuation account is pooled with other members’ money to buy investments. You can choose the investment options your money buys based on how much risk you are willing to take. The aim is for the investments to make a return that will grow your balance over time, providing you with a comfortable and enjoyable future when you retire. All investments, including your investments through super, move up or down in value based on what someone would be willing to pay for them at a point in time. Over the longer-term, however, it is expected your super investment will grow in value.
Index management aims to replicate the performance of a broad market index such as the S&P/ASX 300 for Australian shares with index management costs typically significantly lower than active management costs. Australian Retirement Trust’s index investment options allow members to access a range of low cost, single asset class options, catering for their different investor needs.
Superannuation funds generally offer a range of investment options for members to choose from. These can include diversified options that contain a range of different asset classes such as property, shares and cash, or options that are a single asset class. This term can also refer to investment options outside of super, which can be as broad as the physical assets, products, countries and currencies that exist.
Also called sustainable investing or responsible investing, socially responsible investing or ESG investing. A growing number of private, corporate and superannuation fund investors are increasingly making decisions about the countries, industries and companies they invest their money in after considering some level and type of environmental, social or governance factors. Australian Retirement Trust believes environmental, social and corporate governance (ESG) factors have the potential to financially impact our investments. We engage with our investment managers and encourage them to consider ESG factors, labour standards and ethical considerations and give them the flexibility to determine the extent of these considerations in their investment decisions. Australian Retirement Trust does not directly invest in tobacco manufacturers. Australian Retirement Trust’s ESG policy applies to actively managed options other than the Socially Conscious Balanced investment option. Australian Retirement Trust also offers a Socially Responsible Investment (SRI) option, the Socially Conscious Balanced investment option. This option seeks to invest with managers that are identified leaders in their responsible approach to environmental, social and ethical considerations, labour standards and governance. Find out more in our Investment Guide.
Superannuation income stream
A superannuation income stream is also called a retirement income account or an account-based pension. You can generally start to draw out your super as an income stream through a Retirement Income Account once you reach your preservation age and retire, or turn age 65 whether you are retired or not. Considering when and how you can start to draw an income stream from your super is best done with the assistance of a fully qualified financial adviser.
The money you have in your superannuation account is invested in one or a range of investment options by your super fund. You can choose the investment options(s) or if you don’t make a choice your super fund will invest your money in their default option, which will generally contain a balanced mix of assets. All investments, including your investments through super, move up or down in value based on what someone would be willing to pay for them at a point in time. Over the longer-term, however, it is expected your super investment will grow in value.
Active management is based on the belief that the broad market can be beaten by picking higher performing securities or asset classes, despite the higher costs involved. Australian Retirement Trust employs active investment management in several of the investment options we offer. In addition to expecting our managers to outperform their benchmarks through active management, we expect all our managers to: have world–class professional investment processes, complement each other’s processes and styles, and be cost effective.
Super funds charge investment fees to manage each investment option the fund offers. Australian Retirement Trust sets investment fees to match expected investment fees for the year ahead. The estimated investment fees are our best estimates based on recent experience and our current long-term expectations for ongoing investment fees. We report the investment fees in two components: the base fee and the performance-related fee.
Super funds engage professional fund managers to invest members’ money on their behalf. If these managers exceed certain performance targets for the investment returns earned on the investments they make, the super fund will pay them a performance fee. Performance fees are part of the investment fee charged as a percentage of your super balance. Investment fees aren’t deducted directly from your account – they are instead deducted from the daily unit price of the investment option, slightly reducing the investment return you would make on that day.