Newsletter • Quarter 3 • 2022
Woolworths Group Retirement Fund
The chart above shows the investment returns of the Woolworths Group Retirement Fund’s High Growth Portfolio, in which most members are invested. All returns are net of fees. These investment returns are compared to inflation and to the Balanced Index. The Balanced Index represents the market returns of a similar investment strategy – approximately the returns you would earn if your savings had been invested without using investment managers to make active investment decisions.
Inflation is one of the biggest risks you face WHEN saving for retirement. It erodes the value of your savings over time.
Therefore, Over the long term (10 years or more), your savings need to grow by an investment return that is AT LEAST higher than inflation.
Over the long term, the High Growth Portfolio has comfortably earned investment returns higher than inflation. This portfolio’s long-term performance was similar to that of the Balanced Index, and over shorter periods the returns were higher than those of the Balanced Index.
Saving for your retirement is long term. The 10-year returns of the Fund (the long term) is where your focus should be when looking at the investment performance of your retirement savings.
Avoid the short-term noise
Over the short term, such as the one year period, investment returns may go up or down as they are driven by current events and the prevalent 'noise' in investment markets. 'Noise' here refers to the day-to-day flow of news and activity (both globally and locally) that affects investment market returns. These events are virtually impossible to predict in the short term, and the effects are not a representation of the long-term trend.
Saving for retirement is a joint effort
The important task of saving for retirement is a joint effort between the Woolworths Group Retirement Fund, overseen and governed by the Board of Trustees with access to expert advisers, and you, the member. Your retirement savings are invested, over the long term, using a diversified and disciplined investment strategy designed to transition your savings appropriately as you get closer to retirement.
The Trustees of the Fund work with expert advisers on the design of the investment strategies, and appoint professional asset managers to manage the investment decisions. Understanding how your retirement savings are invested and how the relevant decisions are made will give you more peace of mind.
Appointing asset managers
The Trustees delegate the selection of investment companies and instruments to professional asset management firms. Excellent resources and high levels of skill are required to successfully make the difficult investment selection decisions. It requires the necessary research on all the available companies, which in itself is a full-time undertaking and requires high levels of expertise.
Reviewing an asset manager’s appointment
The Trustees oversee the appointed asset managers and regularly monitor their investment decisions and performance against the specified objectives. The Trustees may review the appointment of an asset manager at any given time.
Here are examples of issues that may result in the Trustees reviewing an asset manager’s appointment:
- A change in the business of the asset manager which may affect its investment success rate
- Rapid growth or decline in the size of the asset manager's business
- Change in ownership, management or leadership or another significant business transaction in the asset manager's business
- Loss of key investment decision-makers (such as the portfolio manager), or a perceived loss of focus by key decision-makers in the asset manager's business
- A change in the asset manager's investment approach or philosophy, or the taking of inappropriate risks
- A change in market conditions or regulations that makes the asset manager’s investment approach no longer effective
- Breaches of the asset manager’s contract with the Fund
- Any financial irregularities, poor ethics or culture, or non-compliance with legal or regulatory requirements
- Failure to meet operational standards or requirements.
Poor performance alone is not a motivation for terminating an asset manager’s appointment. Understanding the cause of poor performance is key in reviewing the asset manager’s appointment.
Like economic cycles, asset managers' performance also tends to work in cycles. Often the best performing asset manager today will not necessarily be the best performing asset manager tomorrow. This makes the ongoing evaluation of asset managers challenging. To manage this, the Trustees appoint a diversified blend of asset managers who follow different investment approaches and philosophies.
Appointing diverse asset managers
The performance of individual asset managers varies, but what is important is that the total performance of the blend of asset managers meets the Fund’s objectives over the long term.
The Trustees rely on an independent investment consultant to remain in regular contact with the appointed asset managers and to inform the Trustees of any important changes or potential issues that should lead to a review of that asset manager’s appointment.
Asset managers are not simply appointed and then left to manage the Fund’s assets without oversight. Nor are they appointed or terminated without robust consideration. The performance of each asset manager is monitored carefully and, after a detailed evaluation, an appointment may be reviewed and terminated when necessary.
THE INVESTMENT OF YOUR RETIREMENT SAVINGS IS LONG TERM.
The trustees ensure that your retirement savings are managed with long-term objectives in mind.
