Investment update
The 2008/09 financial year is likely to be remembered as the most severe global economic downturn in most peoples' lifetime.
Known as the global financial crisis, this downturn began in 2007. In October that year the first of a number of falls on major sharemarkets took place, leading to a sustained period of negative returns from the asset class of equities, or company shares.
Events reached a climax in 2008/09 as financial markets around the world experienced an almost total failure, which some commentators called a crisis of capitalism. This placed significant pressure on the health and stability of the world's economy.
Extra space has been dedicated in this Member Report to explaining the financial and economic events which led to the crisis. We feel this is worthwhile as it can help to shed light on why this downturn had such a severe impact, which is still felt today.
In this update we also answer questions which members may have, and provide general guidance for the road ahead. Lastly, we explain why financial markets must now look beyond a business as usual style recovery as the world considers a move to a low carbon economy.
What action did VicSuper take?
VicSuper has a well-established investment policy in place, which we maintained throughout the global financial crisis. VicSuper follows a primarily passive investment management approach - which means for most asset classes we seek to achieve investment returns equal to the return of a relevant financial market or index.
VicSuper's investments are diversified across many regions and financial markets via investment in four distinct asset classes - equities (or company shares), cash, fixed interest and property. VicSuper therefore holds a large number of companies and other securities, which helps to diversify investment risk.
To set the percentage of one or more of these four asset classes allocated to each of VicSuper's seven investment options, we invest according to a strategic asset allocation. Members can therefore select an appropriate mix of asset classes to build their savings over the long term, based on their investment risk and return profile.
For further details, refer to the VicSuper's investment policy section.