Australian Bond (Super)

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Investment option type Sector
Member suitability Suits members who want to invest in a specific asset class and are less comfortable with large fluctuations in the value of their investments.
Performance objective* To achieve (after Fund taxes) returns in excess of a relevant government bond index (adjusted for fund taxes) over the suggested time frame.
Investment strategy To predominantly invest in securities (including but not limited to) securities issued or guaranteed by the Australian (Federal and State) governments and cash.
Suggested investment time frame Minimum of five years
Expected frequency of negative annual return Three to less than four in 20 years
Summary risk level Medium to high
Option size# $849.4 million (as at 31 August 2019)
Total fees and costs (%) 0.21

* Performance objectives are not promises or predictions of any particular rate of return.
# Size of both accumulation and pension assets.


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 on a daily basis. This is because the bond market constantly reassesses interest rates based on factors that include the direction of monetary policy, inflation and borrower credit worthiness.

Bond prices typically have an inverse relationship with interest rates, so lower interest rates means higher bond prices, and vice versa. 


Can you get a negative return in the Australian Bond Option?

Yes, it’s possible.

The Australian Bond option predominantly invests in securities issued or guaranteed by the Australian (Federal and State) governments, and cash.

The interest rate paid on these 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 six months and repay 100% of the principal in 10 years’ time. 

The bond market constantly reassesses interest rates based on factors including the direction of monetary policy, inflation and borrower credit worthiness. The current market yields affect the valuation of individual bonds. Bond prices typically have an inverse relationship with interest rates, so higher interest rates means lower bond prices, and vice versa. 

If this 10-year government bond was held for three years, such that it now had seven 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. Of course 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” on a daily basis which means each bond is effectively valued according to what the market would actually 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. However, the downside to ensuring fairness is that the capital value of the option will fluctuate. 

Option Performance (% p.a.)1

Vs Objective

As of 30 Jun 2019

Australian Bond Option Yield AusBond Outperformance
5 years 4.3 4.3 0.0

VS Peers

As of 31 Aug 2019

Australian Bond Option SuperRatings Median Outperformance
1 Month 1.44 -- --
3 Months 3.24 -- --
FYTD 2.28 -- --
1 Year 10.30 -- --
3 Years 4.01 -- --
5 Years 4.58 -- --
7 Years 4.26 -- --
10 Years 5.20 -- --

Periods less than a year are not annualised

Some performance data are not yet available for this option.

Option Performance ($)2

Strategic asset allocation (%)3

Last updated on 1 September 2014

Major Holdings4

By value (descending order) as at 31 August 20195


Australian Government 05/2028
Australian Government 04/2027
Australian Government 04/2023
Victorian Treasury Corp 10/2021
Western Australian Treasury Corp 10/2022
Australian Government 04/2026
Australian Government 04/2025
Australian Government 04/2024
Australian Government 11/2028
Queensland Treasury Corp 07/2021

View Disclaimer Information more

1 Past performance is not an indicator of future performance. Some performance data are not yet available for this option. Option returns are calculated net of investment expenses and Fund 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.

2 Past performance is not an indicator of future performance. This graph shows the growth of $10,000 invested in this option over the period illustrated net of investment expenses and fund taxes but gross of account-based fees. No adjustments have been made to reflect the impact of inflation.
Note that the graph uses interim daily crediting rates and does not reflect the final crediting rates which are used to calculate option performance in the table above.

3 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.

4 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.

5 Value includes direct holdings only and does not include exposures from indirect holdings.

Note: 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.

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 in this document.