Investment Choice
What is investment Choice?
Super Fund is now structured to offer mix of asset allocation based on life stage and risk preference. Members have the choice to select their investment options or follow our proposed lifestyle guide set by the Management Committee, under the guidance of the Fund Manager and the Actuarial & Investment Consultant, consistent with a variety of risk tolerances and individual choices. This new structure helps to grow and develop a body of wealth through market linked investments. The member’s account of each individual will be invested on the basis of his risk appetite.
Lifestyling Concept:
- Takes a view on what might be appropriate for “average” investor going through lifecycle.
- Starts with higher risk investments at younger ages and gradually shifts towards lower risk investments at older ages.
- Reduces volatility of pension outcome at retirement.
Accumulation Phase
Members may prefer investing in high risk assets and following an aggressive investment strategy to achieve maximum long term growth.
Consolidation Phase
Members may have more resources to devote to investment but may prefer a less risky approach as the timing of conversion from Personal Member Account (PMA) to pension is crucial.
Spending Phase
Members are no longer working and are now living on income and capital accumulated in the first two phases.
Equity vs Bond
Equities and Bonds are financial instruments to allow investors to obtain returns and allow companies to raise capital. However each carries different level of risk. Equity, represented by stocks, comes with greater risk. The value of stocks corresponds to value of the company and therefore the stock price fluctuates depending upon how the market values the company. In contrast bonds are loans offered at a fixed interest rate. With bonds, the investor is promised a fixed return.
- Bonds are considered safer because of its lower volatility compared to equity. Historically bonds have an annual volatility of 5% compared to 25% for equities.
- While bonds are considered safer than stocks because of their lower volatility, the company may be unable to repay bond-holders. In that sense, corporate bonds are not ‘risk free’. However, sovereign bonds, i.e bonds issued by a national government are considered to be less risky than corporate bonds.
- Some sovereign bonds are even considered to be risk free ,e.g. bonds issued by the US Government
- As suggested by the Investor Lifecycle, as an investor ages their preference for risk gradually diminishes.
- The new Super Fund structure caters for this change in risk profile by starting with a high equity exposure, which gradually diminishes to allocate more to bonds as the individual ages.
OPTION A : Default Investment Strategy
Super Fund proposes a default investment strategy, whereby members’ investments will be allocated to one of our default sub-funds: Aggressive Fund, Moderate Fund, Conservative Fund and Defensive Fund. These sub-funds are based on a lifestyling portfolio strategy which has been set up by Super Fund’s Investment Manager, AfrAsia Capital Management Ltd. The four sub-funds provide access to two major asset classes regrouped under Equity and Bond.
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The Aggressive Strategy consists of a higher proportion of equity-type investments and a lower proportion of fixed-income (Bond) investments whereas the Defensive Strategy consists of a higher proportion of fixed-income (Bond) investments and a lower proportion of equity-type investments.
For more detail please download the Investment Options Flyer
OPTION B : Client Choice Allocation
Super Fund also caters for more sophisticated investors who can take their own investment decisions and for those who think that our default investment strategies do not suit their needs. In this case, you will have the choice of not adhering to our default investment strategy but instead choosing your own combination of the various sub-funds.
Members also have possibility to switch their investment among the various funds;
Fund Switching:
The way your existing member account is invested
Fund Switching consists of the re-allocation (switching) of the composition of your Member Account among the various sub-funds on a given date. One member may, for example, choose to invest in the following proportion: 70% Aggressive Fund; 20% Moderate Fund; and 10% Conservative Fund, while another member may choose another proportion: 15% Aggressive Fund and 85% Conservative Fund.
In this case, the first two annual fund switches will be free, but an additional fee of Rs 500 per member per switch will be applied for any extra switch in excess of two in a given year.
For more detail please download the Investment Options Flyer
Contribution Switching:
The way your future Contributions are invested into your member account
Contribution Switching consists of the allocation of future contributions. The instructions for the changes in the contribution proportion can be given on a monthly basis.
You may, for example, choose the same proportion as in the ‘Fund Switching’ as above or you may choose a different one.
For more detail please download the Investment Options Flyer