At GESB we take the job of managing your super seriously. We follow a careful process that helps us to grow your super and give you every chance to achieve your financial goals. This page provides an outline of our investment process - the rules we follow, the decisions we make and how we conduct reviews to stay on track.
Your super is market-linked
If you have a GESB Super or West State Super account, then you have a market-linked super fund. This means GESB invests your super, and any contributions you make, into a range of financial assets such as shares, bonds and property.
We do this because investing in financial assets is a proven way to grow wealth. Historical data shows that investing in a balanced mix of assets achieves sound returns over the long term.
About asset classes
Shares (also known as equities), property, fixed interest (also known as bonds) and cash are all different types of asset classes. Anyone can invest in these types of assets, yet it takes experience to do it successfully on a consistent basis.
GESB invests in assets in Australia and overseas. You may not have realised, but through your GESB super account you own a variety of Australian and international assets. When the value of these assets goes up, your super grows through investment returns.
Each of these asset classes behaves differently. In financial terms, they have different risk and return characteristics. Return is the gain or loss in the value of an asset over a period of time. And risk is the chance that the return will be different than expected.
Shares, for example, are considered to be a higher risk asset. They have proven to achieve high returns over the long term, yet there is a strong chance that they will occasionally fall in value.
Cash, on the other hand, has historically achieved low returns. However, returns from cash tend to be stable, so you can be confident it will almost always produce a positive return.
There's also a group of assets called alternatives; these don't fit into any of the asset classes mentioned above. Alternatives may include commodities (eg gold or oil), currencies and infrastructure, and may vary in their risk and return.
What assets your super is invested in - your investment plan
You have a choice over what asset classes your super is invested in - this choice can be made through your investment plan. You don't need to be an expert to make a choice - we make it easy by creating Readymade investment plans. These are preset plans with different combinations of assets, from lower to higher risk.
To help you choose an investment plan, use our Risk profile calculator. You'll get a better idea of whether you should choose a higher risk, or 'growth' plan, or a lower risk, 'conservative' plan. GESB offers a variety of plans to suit your needs.
You can see what investment plan you are currently in on your member statement or through Member Online.
How we decide on the make-up of investment plans
GESB employs asset class strategists - experts who analyse asset classes and help decide on the appropriate mix for each investment plan. Together with the help of external consultants, they base their decisions on the long-term outlook for the risk and return of each type of asset. This process is called asset allocation.
GESB's asset class strategists strike a balance between different types of assets - some higher risk (like shares), others lower risk (like cash). For each type of asset, there are a number of things to consider. For example, the following decisions are made about shares:
Australian shares or international shares
Emerging markets (ie developing countries) or developed markets
Small companies or large companies
Decisions about asset allocation - from what types of assets through to the various options for each - are made to achieve diversification in the investment plans. Diversification is a widely used method to reduce the overall risk of investing, and reflects the fact that financial assets don't all go up and down in value in unison. It is akin to not placing all your eggs in one basket. Diversification can help produce more consistent returns from your super over the long term.
GESB follows guidelines to ensure consistent decisions are made about asset allocation. For example, the GESB Board sets objectives for each investment plan to help ensure that asset allocations are made with a long-term view. GESB believes that making investment decisions with long-term goals is superior to making decisions based on the short-term movement of markets. For example, the price of shares can change by the minute and it is impossible to predict every short-term movement. However, history shows us that shares tend to increase in value over the long term - so we are not distracted by short-term price changes.
How we buy and sell assets
Given the complexity of investing in Australia and overseas, GESB uses the services of professional investment managers. Investment managers are companies that specialise in buying and selling specific financial assets. While GESB makes the decisions on what type of assets we invest your super in, the investment managers conduct the transactions on our behalf. For example, the investment managers for Australian shares decide which companies to buy shares in, which to sell, and place orders for the purchases and sales.
GESB typically appoints more than one investment manager for each asset class. This 'multi-manager' approach captures the skills of a range of investment managers from around the world, while mitigating the risk of having a concentrated exposure to a particular manager or investment style. It helps GESB achieve diversification amongst investment managers, which contributes to consistent returns over the long term.
Note: some of the cash assets may be invested directly in bank term deposits.
GESB's asset class strategists have an in-depth understanding of investment markets, and conduct significant due diligence when selecting investment managers. GESB chooses investment managers that have clearly-defined investment approaches, along with the prospect of achieving superior long-term returns.
The Treasurer has a role in matters that affect the financial rights and obligations of the state. Key responsibilities specific to the Treasurer under the State Superannuation Act 2000 include approving:
Prudential Guidelines that cover the nature of investments that the board can make;
The appointment of investment managers; and
Regulations that affect the financial rights and obligations of the Crown.
The chosen investment managers are subject to ongoing reviews, including assessments of their risk and return profiles, their adherence to GESB's expectations and their prospects for continuing to generate superior long-term returns.
How we review the performance of investment plans
GESB regularly assesses the returns of each of the investment plans and the assets they invest in.
Each diversified investment plan has an objective for its return based on the Consumer Price Index (CPI), which is a measure of inflation in Australia. For example, the investment objective for the GESB Super Growth investment plan is CPI + 3.7%; this represents a high level of growth above inflation. The objective for each investment plan, and the mix of assets they invest in, is formally reviewed every year. The objective for your investment plan is contained in the quarterly fact sheet.
GESB also reviews its investment portfolios to ensure the mix of assets remains in line with our asset allocation ranges. For example, if the value of Australian shares grows faster than other asset classes, a portfolio may increasingly be weighted to Australian shares. Ongoing reviews help ensure the percentage held in each asset class remains within the asset allocation ranges over time.
Are you in the right investment plan?
The important thing is not to pick the investment plan that is performing best, but one that suits your investment risk profile. You can get an idea of your risk profile by using our Risk profile calculator.