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| Superannuation Funds - Managing investments |
| MANAGING INVESTMENTS. |
MANAGING INVESTMENTS:
A key area of responsibility for trustees of self managed superannuation funds is investment management. SIS places certain duties and responsibilities on trustees when making investment decisions. They aim to protect and increase member benefits over time for retirement purposes.
INVESTMENT STRATEGY:
The trustees of every SMSF are required to prepare and implement an investment strategy for the superannuation fund. The strategy must reflect the purpose and circumstances of the fund and consider:
1. Investing in such a way as to maximise member returns having regard to the risk associated with holding the investment;
2. Appropriate diversification and the benefits of investing across a number of asset classes {e.g. shares, property, fixed deposit) in a long term investment strategy; and
3. The ability of the fund to pay benefits as members reach retirement and other costs incurred by the superannuation fund.
An appropriate investment strategy will set out the investment objectives of the fund and detail the investment methods the fund will adopt to achieve these objectives. Trustees must make sure all investment decisions are made in accordance with the documented investment strategy of the fund and should seek investment advice or appoint an investment manager in writing if in any doubt.
INVESTMENT RESTRICTIONS:
The superannuation law does not state exactly what a fund can and cannot invest in. It does however restrict some investment practices of superannuation funds. The investment restrictions aim to protect fund members by ensuring fund assets are not overly exposed to undue risk {for example the possible risk of an associated business failing).
Secondly, they aim to ensure that funds make investment decisions with the primary purpose of generating retirement benefits for members rather than providing current day support.
Investment rules are one of the most important requirements of SISA and failure to comply with the rules could result in trustees being fined and/or the fund losing its compliance status.
Taken from ATO publication 'A DO IT YOURSELF GUIDE FOR TRUSTEES RUNNING A SELF-MANAGED SUPERANNUATION FUND'
15th-May-2001 |
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