Document ID: chunk:federal_register_of_legislation:F2022L01492:body:0:p4
Version: federal_register_of_legislation:F2022L01492
Segment Type: other
Provision Reference: 
Character Range: 9174–12411

when determining an appropriate level of diversification for each investment strategy[8]:

       (a)          identify the risk factors, and sources of return with which the risk factors are associated;

       (b)          where the strategy includes multiple assets and/or asset classes, identify how sources of returns are expected to interact, the variability in these interactions and the impact of these interactions on the overall diversification of the strategy in different market conditions;

       (c)          determine the target exposure to the risk factors in paragraph 20(a); and

       (d)          determine the asset classes and/or individual assets that it will invest in to achieve the desired risk exposure and whether making, holding and realising investments in those asset classes and/or individual assets can be implemented in a manner consistent with the interests of, and the RSE licensee's duties to, beneficiaries.

    21.         An RSE licensee must, at a minimum, determine for each investment strategy for an investment option that includes multiple assets and/or asset classes:[9]

       (a)          asset allocation targets and ranges that are appropriate to the investment objectives of the investment option;

       (b)          the basis on which asset allocation targets and ranges would be changed; and

       (c)          a policy to monitor and maintain the asset allocation within the determined ranges within a reasonable timeframe.

    22.         For the investment strategy of a MySuper product, an RSE licensee must also document, in addition to the requirements in paragraphs 19-21 inclusive, at a minimum, how the investment strategy:

       (a)          is diversified over multiple risk factors and sources of return as required in the SIS Act;

       (b)          complies with section 52(13) of the SIS Act; and

       (c)          complies with the relevant fee rules for MySuper products and general fee rules in the SIS Act.[10]

Giving effect to the investment strategy

    23.         An RSE licensee must have processes and criteria for selecting each investment to give effect to the investment strategy (investment selection process) to ensure that effective due diligence that is commensurate with the nature and characteristics of the investment is undertaken prior to the selection of an investment for an investment option.[11]

    24.         An RSE licensee's investment selection process must enable the RSE licensee to ensure:

       (a)          it has sufficient understanding and knowledge of the investment selected, including an assessment of any factors that could have a material impact on achieving the investment objectives of the investment option;

       (b)          it has sufficient understanding of how the investment is expected to perform under the range of stress scenarios determined under paragraph 31; and

       (c)          the investment is appropriate for the investment option.

Monitoring investments

    25.         An RSE licensee must determine appropriate measures, for the purposes of monitoring performance on an ongoing basis, in respect of each MySuper product, each investment option and each