Standard Risk Measure
What exactly is a Standard Risk Measure (SRM)?
The SRM is a guide to estimating the expected number of negative annual returns in your super fund over any 20-year period. It helps you compare different investment options by giving “risk” labels to each option depending on the estimates, and is based on industry guidance.
We have engaged an external consultant to calculate the SRM for each of the investment options, using a model which meets guidelines introduced by ASFA/FSC in July 2011.
The SRM is not a complete assessment of all forms of investment risk, for example it does not detail what the size of a negative return could be or the potential for a positive return to be less than what you may require to meet your objectives.
The asset class risk and return characteristics are applied to a fund’s asset allocation to product both an expected return and a probability of a negative return in any one year. This is then utilised to provide the probability of the number of negative annual returns over 20 years.
Depending on the number of expected negative annual returns over a 20-year period, each investment option is classified in a risk band, ranging from very low risk (such as cash based options, where there are 0.5 or less expected negative annual returns in any 20-year period) to very high risk (such as high growth options, when there are six or more expected negative years out of 20).
The SRM for each of our investment options can be found below:
Aware Super Pty Ltd Products:
| Investment Option | Tailored Super Plan, Personal Retirement Plan & Transition to Retirement Pension | Flexible Income Plan, Allocated Pension & Term Allocated Pension | ||
|---|---|---|---|---|
| Risk Band | Risk Label | Risk Band | Risk Label | |
| Diversified options | ||||
| High Growth | 6 | High | 6 | High |
| Growth | 6 | High | 6 | High |
| Socially Conscious | 6 | High | 5 | Medium to High |
| Balanced Growth | 4 | Medium | 4 | Medium |
| Conservative | 3 | Low to Medium | 3 | Low to Medium |
| Defensive | 2 | Low | 2 | Low |
| Single asset class options | ||||
| Australian Equities | 7 | Very High | 7 | Very High |
| International Equities | 7 | Very High | 7 | Very High |
| Property | 6 | High | 6 | High |
| Fixed Interest1 | 5 | Medium to High | 5 | Medium to High |
| Cash | 1 | Very Low | 1 | Very Low |
Investment Funds:
| Investment Option | Risk Band | Risk Label | |
|---|---|---|---|
| Capital Stable | 3 | Low to Medium | |
| Moderate | 4 | Medium | |
| Balanced | 5 | Medium to High | |
| Growth | 6 | High | |
| Cash | 1 | Very Low | |
| Fixed Interest1 | 5 | Medium to High | |
| Australian Equities | 7 | Very High | |
| International Equities | 7 | Very High | |
1 The Standard Risk Measure is only a measure of the estimated number of negative annual returns over a 20 year period and is not a complete assessment of all forms of risk, for example it does not take into account the size of a potential negative return. Despite the Fixed Interest investment option/Fund being assessed as having a Standard Risk Measure of ‘5 – Medium to High’, when we assess the expected risk more holistically, the option/Fund is only expected to have a moderate level of risk.