Thursday, April 16, 2009

Investment Choice

In this final post in this series I'm going to look at the investment choice in my super fund. You can either choose a preset mix of asset classes or make your own choice from a short menu. The premixed options have slightly higher percentage management fees but choosing the a la carte option incurs an extra $60 fee per year. I suppose the extra percentage fee is either for rebalancing or for access to the alternative asset class that is not included in the menu. And the property component is a mix of direct property investments and REITS while the a la carte option is REITS only. The "Growth" portfolio costs 0.57% vs. 0.37% for "Australian Shares" and 0.33% for "International Shares".

These are the returns of the different pre-mixed options over the last 5 financial years, the current financial year till the end of December and the current quarter.

Over 5 years till June 2008 the High Growth portfolio has the highest return. Over 7 years though (not shown) the Growth Portfolio had slightly higher returns (7.14%, after tax of course).

The Growth portfolio is invested 32.5% in Australian Shares, 30% in International Shares, 15% in Fixed Interest, 12.5% in Alternative Investments, and 10% in Property. In other words it is a 60/40 portfolio with a diversified 40 component. The High Growth portfolio is invested 40% in Australian Shares, 32.5% in International Shares, 17.5% in Alternative Investments, and 10% in Property. The Balanced portfolio is 30% Fixed Interest, 27.5% Australian Shares, 25% International Shares, 10% Property, and 7.5% Alternatives.

My current target is 28% Australian Shares, 14% International Shares, 10% Bonds, 9% Property, 33% Alternatives, and 6% Cash and Other Assets. But it turns out that Unisuper's alternatives are infrastructure (which I classify as real estate) and private equity. And, in fact, all current alternative investments are infrastructure or timber plantations.

It turns out that the Growth Portfolio is nearest to my target allocation, though it is still further from my target than our current portfolio is. Snork Maiden's superannuation is closer to the target than the current portfolio. Compared to other portfolios I track it is the following "distance" from:

Moom 28%
Moominmama 47%
PSS(AP) 28%
Yale 47%
Harvard 36%
Princeton 51%
Average US Endowment 39%
The Future Fund 28%

Not surprisingly, it's most similar to other Australian funds. It is also a good diversifier relative to Moominmama. It's not possible to get closer to my target using choices from the a la carte menu. So the choice is made.

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