Fixed Interest option

Fixed Interest is one of Equipsuper's Sector Specific options, which means all the money is invested in a single asset class - diversfied fixed interest. You should proceed cautiously when investing in any Sector Specific option and we strongly recommend diversifying your investments to reduce risk and volatility over the long term. To diversify your investments, you can invest in multiple Sector Specific options, or combine Sector Specific options with any of the Equipsuper Diversified options. We provide an outline of factors influencing the risk associated with investing in Overseas Shares on this page.

Strategy

Invest in interest-bearing bonds and some indexed bonds in Australia and overseas.

10-Year Performance - Fixed Interest

This is how the Fixed Interest option performed over the ten years to 30 June 2011.

FinYearReturns_Fixed Interest

Net annual returns^#	Superannuation	Pensions
30 June 2011	5.9%	6.9%
30 June 2010	8.8%	10.3%
30 June 2009	7.0%	8.2%
30 June 2008	3.2%	3.5%
30 June 2007	3.0%	3.5%
30 June 2006	3.5%	4.1%
30 June 2005	7.2%	8.2%

Comment on performance

Over the long term, fixed interest will deliver lower returns than growth assets. There are times when the regular income payments that fixed interest provides make this type of investment attractive.

Also called bonds, these investments are issued by Federal and State Governments and some companies. If you buy a bond it usually entitles you to regular payments of interest over a fixed period plus the return of your investment at the end of the period. Our Fixed Interest investments include both Australian and International bonds.

Our Fixed Interest investments may also include indexed bonds, which are similar to other fixed interest investments except that their returns are increased (indexed) each year by the amount of inflation. They offer good insurance against a rise in inflation with similar risk and return to fixed interest.

Comment on risk

Fixed interest is a relatively lower risk investment in bonds. It may also include investments in the term deposits offered by financial institutions with which most of us are familiar. The bond market is a complex trading environment, driven by economic factors, investor sentiment towards growth assets like shares and interest rate movements. In a rising interest rate environment, bonds can lose some of their capital value.

With some exposure to overseas bonds, there is the added potential for volatility caused by fluctuating currency exchange rates. If you are investing in overseas markets in Australian Dollars, the value of your investment will decline if the Australian Dollar’s value increases substantially against other currencies. Of course, the opposite is true if our Dollar’s value declines.

To offset this risk, some super funds, including Equipsuper hedge against currency fluctuations^.

# Note that past performance is no indication of future performance.
^ Changes in the value of the Australian Dollar on currency markets can significantly affect the investment performance of overseas assets. Equipsuper’s investments also include investments in international fixed interest (bonds) and listed international property investments. However, these investments are generally fully hedged back in to Australian dollars (with minor deviations due to market movements) minimising the impact of exchange rate fluctuations.