Some of your super and pension clients were identified through our investment risk analysis as having a higher level of investment risk.
Sometimes referred to as “stress testing”, the analysis is not an assessment of the adequacy of your client’s portfolio. We’re bringing these results to your attention, so you can consider if any action is required.
Understanding stress testing
Macquarie Investment Management Limited as a trustee is required by the Superannuation Prudential Standards to have a comprehensive stress testing program in place.
The stress test identifies portfolios that could be impacted the most by adverse market conditions. We apply various future performance scenarios and compare the impact of these on each super and pension member portfolio.
Members are identified as having a higher level of investment risk where, under stress test conditions, their loss would be greater than the loss of a diversified Australian equity portfolio, or an equally weighted portfolio of 10 stocks for members holding ASX securities1.
Generally, less than 2.5% of all portfolios are identified as having a higher level of investment risk.
1 Excluding ‘Australian Listed Securities classified as Managed Investments’ such as exchange traded funds.
What you need to do
Please consider whether the stress test has highlighted the need to review the portfolio of any of your clients. In particular, whether further diversification could help in protecting their balance from adverse market conditions.
After reviewing the information, you may decide no action is required.
Please note: stress testing is performed at the client level. If your client holds more than one super and/or pension account, they will have all of their accounts flagged.
If you have any questions, please see our Help Centre article or contact us.