20 December 2022
When it comes to investing, there are two main approaches: active and passive management. Active management is when an investor proactively makes decisions over which investments are bought or sold. Discover how this approach can play a fundamental role in delivering long-term outperformance and net benefit to members.
Active management is a cornerstone of AustralianSuper’s investment strategy. It’s a hands-on investing approach that aims to help our members achieve their best financial position in retirement. Learn about how active management can help grow your super savings.
How active management can add value for members
Proactive investment decisions
An active manager is an investor who proactively makes decisions over which investments are bought or sold.
This strategy differs from passive management or index investing, which simply follows the performance of market indexes. For example, a passive manager may invest in the 200 companies that make up the ASX 200 Index in order to track its investment performance.
Active managers use extensive research, expertise and experience to inform their investment decisions in order to help add value and drive outperformance.
Working to a benchmark
The main goal of any active manager is to outperform their relevant benchmark while managing risk effectively. Their performance may be compared to a passive index benchmark or the median performance of other active managers.
Pursuing investment opportunities
Unlike passive funds, active managers can be opportunistic. Volatile markets often lead to the mispricing of assets. As an active manager, we’re always searching for new investment opportunities with long-term intrinsic value. In fact, market downturns can often offer attractive buying opportunities for long-term investors.
Access to unlisted assets
Another benefit of our active management approach is our ability to invest in unlisted assets. This allows us to invest in asset classes like private equity, private credit, property and infrastructure. Because of this, AustralianSuper members own investments in:
- Sydney Airport;
- the Transurban Queensland toll road network; and
- Indara, Australia's largest independent wireless tower and digital infrastructure owner.
Unlisted assets have proven to be a great long-term investment for members. They’re an integral part of most member investment options, providing diversification, relative return stability, historically better risk-adjusted returns and a long-term focus.
Our actively managed PreMixed investment strategies include:
- High Growth
- Socially Aware
- Conservative Balanced
If you’d prefer a passive investment strategy, we also offer an Index Diversified PreMixed option.
A two-level approach to active management
We carry out active management at two different levels of the portfolio:
- through our asset allocation decisions; and
- through our individual investment selections.
Asset allocation refers to how much we invest in each asset class (such as shares, private equity or cash). We adjust the allocation of assets based on opportunities for better performance.
For example, if we anticipate a slowdown in economic conditions, we may reduce the weight to growth assets (such as listed shares) and increase the weight to defensive asset classes (such as fixed interest or cash). This approach seeks to allocate more to asset classes that are undervalued and may benefit from the next phase of the economic cycle.
Individual investment selections
At a more granular level, investment selection refers to the actual buying and selling of individual investments. As an active manager, our investment team seeks out attractive opportunities across each asset class in the portfolio. For example, if we believe a company will outperform its competitors over the long run, we can invest more in that company today.
We specifically choose investments that we expect to outperform indexes. This means we will hold securities at different weights than the index. It also means we can hold larger positions in companies that we believe will have a higher return potential than the index.
This approach allows us to leverage opportunities that may not be available to passive or smaller active managers. For example, we have a global investment capability in unlisted markets. This provides local engagement in North America, Europe and Australia.
- In 2020 we made an infrastructure investment in Transurban’s Chesapeake toll road in the US.
- In 2022 we made a property investment in the Canada Water Masterplan in the UK.
AustralianSuper was the first super fund to establish overseas investment offices in Asia, Europe and North America. This gives us additional insight and access to a larger set of compelling investment opportunities.
Why we believe in active management
It allows us to respond quickly to market changes
Our investment team employs active management through every stage of the market cycle. This means we’re repositioning the portfolio and actively seeking out the best opportunities – through both ups and downs.
When investment markets fall, we can help cushion the impact. And when investments rebound, we can participate in the upside.
It gives us an edge
It’s crucial to be well-informed as an active manager. Our 250+ person1 investment team uses detailed market research and forecasts, leveraging decades of internal experience. We see this as a competitive advantage in selecting the specific sectors, assets and stocks with the potential to outperform the broader market.
It allows us to select top-performing managers
About half of members’ assets2 are internally managed. But we also invest with external managers with specialised expertise or potential to add value to the portfolio.
We choose managers with proven results and a high potential for long-term outperformance. As the largest super fund in Australia, we benefit from access to top performing managers around the world.
For example, our investment team may want to invest in a particular index or region, but the investment costs may be high or active management opportunities may be few. In these types of scenarios, there is often a net benefit to investing in local managers, who can offer exposure at lower overall portfolio costs.
To a limited extent, AustralianSuper may invest passively, however this is primarily to assist with portfolio liquidity or to gain specific investment exposure.
AustralianSuper’s track record as a top performing super fund
Active management has been fundamental to our long-term outperformance. We believe our focus and expertise on asset allocation and investment selection are necessary to be a top-performing super fund. This has been evidenced in our flagship Balanced option ranking in the top two for investment returns over 7, 10 and 20 years to 30 September 20223.
In fact, if an AustralianSuper member had $100,000 invested in the Balanced fund option 20 years ago, that balance would have grown to about $465,000 by 30 September 20224. That is about $55,000 more than what would have been delivered by the median super fund5.
Additionally, our focus on internalising our active management continues to drive investment costs lower. This has helped us decrease investment costs – which saved members $300 million during the 2022 financial year.
Our active management of the portfolio, investments in top-performing managers and reductions of costs have resulted in an overall net benefit for members.
- As at 30 November 2022.
- As at 30 September 2022.
- AustralianSuper Balanced investment option as compared to the SuperRatings Fund Crediting Rate Survey – SR50 Balanced (60-76) to 30 September 2022. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
- AustralianSuper investment returns are based on crediting rates, which are returns less investment fees and costs, the percentage-based administration fee deducted from returns from 1 April 2020 to 2 September 2022 and taxes. Returns don’t include all administration, insurance and other fees and costs that are deducted from account balances. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
- AustralianSuper Balanced investment option compared to the ‘median’ option in the SuperRatings Fund Crediting Rate Survey – SR50 Balanced (60-76) to 30 September 2022. Doesn’t include all admin, insurance and other fees deducted from accounts.