Suitability and risk
Suits members who want to invest in a specific asset class and are less comfortable with large fluctuations in the value of their investments.
Option size1
As at 31 December 2023
Objective and performance
Objective
Performance against objective
2| Bond index | Australian Bond performance | Outperformance |
|---|---|---|
| 0.5 | 0.5 | 0.0 |
Performance against peers
2| Timeframe | Australian Bond performance | SuperRatings median performance | Outperformance |
|---|---|---|---|
| 1 month | -0.33 | - | - |
| 3 months | 2.22 | - | - |
| Financial year to date | 2.69 | - | - |
| 1 year | 2.68 | - | - |
| 3 years | -1.34 | - | - |
| 5 years | 0.16 | - | - |
| 7 years | 1.21 | - | - |
| 10 years | 2.05 | - | - |
Australian Bond option performance ($)
2Objective
Performance against objective
2| Bond index | Australian Bond performance | Outperformance |
|---|---|---|
| 0.5 | 0.5 | 0.0 |
Performance against peers
2| Timeframe | Australian Bond performance | SuperRatings median performance | Outperformance |
|---|---|---|---|
| 1 month | 2.65 | - | - |
| 3 months | 2.65 | - | - |
| Financial year to date | 3.21 | - | - |
| 1 year | 3.20 | - | - |
| 3 years | -1.59 | - | - |
| 5 years | 0.17 | - | - |
| 7 years | 1.45 | - | - |
| 10 years | 2.48 | - | - |
Australian Bond option performance ($)
2Allocations
Strategic asset allocation
3| Asset class | Allocation |
|---|---|
|
Australian Bonds
|
100.0% |
Sector allocation
| Sector | Allocation (%) |
|---|---|
|
Australian Government and Government Guaranteed
|
55.3% |
|
State & Territory Government
|
39.6% |
|
Derivatives and Cash
|
5.1% |
- Commonwealth of Australia
- State of New South Wales
- State of Victoria
- State of Queensland
- State of Western Australia
- State of South Australia
- Australian Capital Territory
- Northern Territory
- State of Tasmania
About bonds
A bond is a debt security such as a loan to a government, corporation (such as banks) or other borrowers. The loan will generally pay interest and principal back to the bond holder over its term to maturity. The interest rate paid on the loan is generally fixed as a percentage payment or as a percentage over some reference rate, for example, the 3-month bank bill rate.
Bond valuations fluctuate daily. This is because the bond market constantly reassesses interest rates based on factors that include the direction of monetary policy, inflation and borrower creditworthiness.
Bond prices typically have an inverse relationship with interest rates, so lower interest rates means higher bond prices, and vice versa.
Negative returns in the Australian Bond option are possible
The interest rate paid on bonds is generally fixed at the time the bond was issued. For example, consider a 10-year bond issued by the Australian government when market interest rates (market yields) were about 3%. The bond would be issued with an annual coupon rate of 3% and, over the 10-year life of the bond, the government is expected to pay a coupon of 1.5% every 6 months and repay 100% of the principal in 10 years’ time.
The bond market constantly reassesses interest rates based on factors such as the direction of monetary policy, inflation and borrower creditworthiness. The current market yields affect the valuation of individual bonds. Bond prices typically have an inverse relationship with interest rates, so higher interest rates mean lower bond prices, and vice versa.
If this 10-year government bond was held for 3 years, such that it now had 7 years to maturity, and market interest rates fell from 3% to 2%, the bond price would rise to about 106.5% of the original principal. However, if market interest rates rose from 3% to 4%, the price of the bond would fall to about 94% of the original principal.
This example uses a single bond to illustrate the concept that, under certain circumstances, bond prices can fall and generate negative returns. The UniSuper Australian Bond option invests in many different bonds with various yields, coupons, and maturities. However, the same principles apply. While UniSuper is a medium to long-term investor, the Bond option is “marked-to-market” daily, which means each bond is effectively valued according to what the market would pay for them if we wanted to sell. This is the only way we can provide a fair outcome to all members in the option, because at any given time some members will be joining the option and others will be redeeming, and we need to process these transactions at a fair market price. The downside to ensuring fairness is that the capital value of the option will fluctuate.
Things you need to know
- Size of both accumulation and pension assets.
- Past performance is not an indicator of future performance. Option returns are calculated net of investment expenses and taxes but are gross of account-based fees. Due to rounding, excess return may not equate to the difference between option return and median return. The SuperRatings data is based on the SuperRatings survey for the relevant period and does not take into account any subsequent revisions or corrections made by SuperRatings.
- The strategic asset allocation may change and may be altered by the trustee from time to time to suit prevailing market circumstances. Actual allocation will deviate from their targets, but are monitored so they are kept within a range approved by the Trustee.
- These holdings may change from time to time. The above holdings are the outcome of various strategies applied by UniSuper and by a range of investment managers taking into account a variety of considerations, many of which are specific to UniSuper and superannuation funds in general. The above lists are published for informational purposes only and are not a recommendation or endorsement of any of the companies listed, for inclusion in your personal portfolio. Before selecting companies to invest in personally, you should seek professional financial advice that takes into account your personal circumstances and investment objectives. Value includes direct holdings only and does not include exposures from indirect holdings.
- Value includes direct holdings only and does not include exposures from indirect holdings.
This information is of a general nature only and does not take into account your individual objectives, financial situation or needs. You should read the product disclosure statement and booklets relevant to your membership category, consider the appropriateness of the information having regard to your personal circumstances and consider consulting a licensed financial adviser before making an investment decision based on information contained here.
The former Australian Fixed Interest investment option was renamed to Australian Bond on 21 April 2012 to more clearly reflect the underlying assets - 100% Australian government bonds. The underlying asset allocation and investment strategy has not changed.