Passive investment management
VicSuper primarily uses a passive investment management approach. This means for most investments we seek to achieve investment returns equal to the return of the relevant financial market. This particular type of investing is called indexing or index management as the objective is to match the performance of an index of securities.
Indexing is low cost because investment turnover tends to be low, and is often referred to as a 'buy and hold' investment method. Cost savings are passed on to members in the form of VicSuper's low fee structure and quality superannuation services, including advice, available as part of a VicSuper membership.
An example of indexing is when we invest in the Australian sharemarket. To do this we invest in a large number of company shares. The total return should match the investment performance of all major companies traded on the Australian sharemarket, less the cost for managing the investment process. The index for the Australian sharemarket consists of the 300 largest companies and is called the S&P/ASX 300 Accumulation Index. The alternative approach to indexing or passive investment management is active investment management.
Active investment management
VicSuper uses a risk-controlled form of active management to invest through unit investment trusts in Australian and international listed shares rated as sustainability leaders, as well as private equity and property. This type of investing aims to outperform the market by investing in a smaller number of securities or assets.