The Cash Plus investment option is designed to provide liquidity for our members and to protect their investments, especially in times of investment market turmoil such as we are currently experiencing with the COVID-19 pandemic.
It suits members who want a low-risk investment with minimal fluctuations in returns. To help deliver these objectives it invests in defensive assets, such as cash and short-term interest-bearing securities.
When markets are highly volatile the Cash Plus investment option may produce small negative returns over short time periods. This is very unfortunate – but unavoidable – in the current market due to:
- Low interest rates: In many countries, including Australia, interest rates are at record lows. They are even negative in some countries. While low interest rates typically help businesses and borrowers, they mean lower returns on defensive assets – including those held by the Cash Plus investment option.
- The impact of administration fees: While these are modest, the underlying returns from cash are sometimes so low that fees may occasionally exceed returns over short time periods.
TWUSUPER is unable to avoid the above factors without increasing the Cash Plus investment option’s risk levels, which we believe are currently at the most appropriate setting for members.
This is an issue affecting all superannuation funds, not just TWUSUPER.