Maritime Super
Maritime Super's innovative risk management overlay successfully cushioned around half of the sharp market falls during February and March, at the height of the COVID-19 crisis, sparing members from further losses to their retirement savings.
Between the market peak on February 20 and trough on March 23, Growth fund members with the optional risk overlay saw balances drop by 9.3%, compared to falls of 18.4% without it, a difference of 9.1%. Across the financial year to March 31, the risk overlay resulted in a return advantage of 3.8%.
Developed with global actuarial consultancy Milliman, the "MVP" risk management program acts as a form of insurance against market volatility. It is included in the MySuper 55 and Over product, protecting members who are approaching retirement, and as an option for Growth and Moderate investment accounts.
Independent analysis confirms the success of the protective overlay, with SuperRatings placing Maritime Super's MySuper 55 and Over option in the first quartile based on performance for the financial year to March 31, while Rainmaker found the fund had produced among the best results during the severe market downturn.
Maritime Super said the results vindicate the fund's risk overlay, which had led to the MySuper offering being unfairly criticised in the media following the release of the Australian Prudential Regulation Authority's Heat Map in December 2019.
"Our membership is skewed towards an older demographic with very high account balances, resulting in a lower appetite for market volatility," Maritime Super CEO Peter Robertson said.
"Following the global financial crisis, members asked whether we could do more to protect their money, which resulted in us working with Milliman to develop the MVP risk overlay.
"The protection overlay effectively sells futures and gradually takes assets out of equity markets during extreme downturns, like we have experienced this year, absorbing the downward spikes and generating liquidity for the fund.
"While it is impossible to be fully immune to sharp declines in investment markets, our defensive strategy and futures overlay has achieved its objective, protecting members from the deep magnitude of the falls.
"For members in the Growth MVP option, it has cushioned approximately half the sharp market drop, while our MySuper 55 and Over option has performed in the top quartile of comparable funds, protecting the savings of older members who are approaching retirement.
"It is important that super products not only strive to maximise returns, but to do so while containing risk, avoiding negative returns and protecting the capital of members."
Milliman Principal and Head of Investment Solutions Jeff Gebler said the risk management strategy developed for Maritime Super had successfully achieved its aim of reducing portfolio falls by up to 50% during extreme market declines.
"This investment strategy sacrifices a small portion of returns in good years, for a substantial benefit in times of crisis," Mr Gebler said.
"Superannuation fund members who are nearing or in retirement have a greater exposure to the consequences of a major market correction.
"The performance during the recent market crisis has been well aligned with the analysis and expectations of the fund and its trustees, resulting in enhanced returns for members."
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