Funds SA, a statutory
body established under the Superannuation Funds Management Corporation
Act 1995, is responsible for the management and investment of the
fortnightly employee (member contributions) and employer (SAPOL contributions)
superannuation contributions to the Pension and Lump Sum Scheme Divisions
of the Police Superannuation Fund and the Employer Contribution Account
(SAPOL contributions).
Superannuation contributions (both employee and employer) are invested
by Funds SA across a diversified range of asset classes:
| • International Shares 38% |
• Inflation Linked Bonds 12% |
| • Australian Shares 34% |
• Fixed Interest Bonds 6% |
| • Property 8%
|
• Cash 2% |
The past year witnessed a continuation of the generally poor conditions
prevailing in international share markets since the middle of 2000.
Nevertheless, a strong rally in the June quarter resulted in a considerably
improved outcome for the current year. International shares (expressed
in local currency terms) returned -5.4% after returning –17.8% in
2002 and -15.6% in 2001. Australian shares also posted a negative
return for the year at –1.6%. The highlights for the year were the
continuing strong performance of Australian property, returning 12.2%,
Australian and international fixed interest returning 9.8% and 12.2%
respectively and inflation-linked bonds returning 10.9%.
For the 12 months to 30 June 2003, Funds SA achieved investment
returns (after fees) for the Pension and Lump Sum Schemes of –0.7%.
History demonstrates that investment markets can experience periods
of extreme volatility from time to time. It is important, therefore,
that a sound investment strategy be pursued, underpinned by a target
return which may realistically be achieved over an appropriate time
horizon with an acknowledged level of risk. The investment objective
set for the Pension and Lump Sum Schemes (the basis on which the abovementioned
investment asset class allocations have been determined) is to provide
an average return of 4.5% per annum in excess of the rate of inflation
over an investment time horizon of eight years. During this period,
however, returns may be volatile and indeed negative returns may be
experienced in two years out of eight.
Over the past eight years, the funds have earned an average 7.7%
per annum. This is 5.1% per annum in excess of the rate of inflation
over the period and hence solidly ahead of the investment target for
the funds. The following table shows the investment returns (after
fees) achieved by Funds SA in each year and the average return over
the period, compared to the rate of inflation.
Investment returns to June 2003
| Scheme | 1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
8 years annualized |
| Pension |
7.2% |
20.7% |
12.8% |
9.5% |
17.0% |
3.4% |
-5.4% |
-0.7% |
7.7% pa |
| Lump Sum |
7.1% |
20.4% |
12.3% |
9.8% |
17.0% |
3.4% |
-5.4% |
-0.7% |
7.7% pa |
| Inflation |
3.1% |
0.3% |
0.7% |
1.1% |
3.2% |
6.0% |
2.8% |
2.7% |
2.5% pa |
Central to Funds SA’s investment approach is the rigorous implementation
of the concept of diversification. Primarily, this is achieved by
spreading investments over a broad range of asset classes as shown
above. Further diversification is achieved by allocating funds to
a range of specialist fund managers carefully selected for their different
and complementary investment styles. As at 30 June 2003, Funds SA
had contracts with 23 major external fund managers to manage its investment
portfolio.
Funds SA does not take short-term, tactical views on the performance
of the different asset classes, but instead maintains a disciplined
focus on long-term asset class allocations designed to produce superior
returns over the targeted investment timeframe and within the agreed
risk profile.
Full details on Funds SA’s investment strategy can be obtained by
contacting Funds SA by: • Telephone: 8204 2355 • Fax: 8204 2366 •
Web: www.funds.sa.gov.au • Email: ceo@funds.sa.gov.au
Crediting rates
At the end of each financial year the Police Superannuation Board
is required to declare rates of return to be credited to the various
accounts of members of the Pension and Lump Sum Scheme Divisions of
the Police Superannuation Fund. The investment returns achieved by
Funds SA are used by the Board to calculate end-of-year crediting
rates.
The Board has determined the following policies in respect of end-of-year
crediting rates to be applied to members’ accounts.
Member contribution accounts
The end-of-year crediting rate calculation is based on the average
of the net rates of return (money weighted return net of the Board’s
administration costs) achieved for the Police Superannuation Fund
(Pension and Lump Sum Scheme Divisions), by Funds SA over the previous
three years.
For the financial year 2002-2003 the Board declared crediting rates
for the Pension and Lump Sum Scheme Divisions of -1 per cent, to be
applied to member contribution accounts. The following table shows
crediting rates for member contribution accounts over the past five
years.
| SCHEME |
1999 |
2000 |
2001 |
2002 |
2003 |
| PENSION | 14.3% | 13.0% | 9.8% | 4.9% | -1% |
|
LUMP SUM |
14.0% | 12.9% | 9.9% | 4.8% | -1% |
Voluntary contribution accounts
The end-of-year crediting rate is the net rates of return (money
weighted return net of the Board’s administration costs) achieved
for the Police Superannuation Fund (Pension and Lump Sum Scheme Divisions),
by Funds SA as at 30 June each year.
For the financial year 2002-2003 the Board declared crediting rates
for the Pension and Lump Sum Scheme Divisions of -0.8 per cent and
-0.4 per cent respectively, to be applied to voluntary contribution
accounts.
Roll-over accounts
The end-of-year crediting rate is the net rates of return (money
weighted return net of the Board’s administration costs) achieved
for the Police Superannuation Fund (Pension and Lump Sum Scheme Divisions),
by Funds SA as at 30 June each year.
For the financial year 2002-2003 the Board declared crediting rates
for the Pension and Lump Sum Scheme Divisions of -0.8 per cent and
-0.4 per cent respectively, to be applied to roll-over accounts.
Crediting rates to voluntary contribution and roll-over accounts
to June 2003
| SCHEME |
2002 |
2003 |
| PENSION |
-5.3% | -0.8% |
| LUMP SUM |
-5.4% | -0.4% |
