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The two big benefits of investing in Australian equities are (long term) capital growth from an increase in the company’s share price, and (short to medium term) income you get through the dividends companies pay to shareholders. These dividends are also important from a tax perspective, as they provide valuable franking tax credits, which help to reduce the tax payable and thereby increase the net return to your portfolio.

Your stake in Australian equities

If your super portfolio is invested in one of our balanced diversified options, approximately 25% or more of your portfolio is invested in Australian equities.

We manage your stake in Australian equities in three key ways:

  1. The portfolio is viewed as an individual ‘sector’ with its own expected return target and risk parameters, with a strategy for achieving that target. While, linking into our overall investment philosophy.
  2. We monitor the asset class to ensure it works in harmony with the other asset classes in your portfolio. This helps to realise the intended diversification benefits while looking for strategic opportunities to either ‘grow’ or ‘harvest’ investments and capture value.
  3. At the core we undertake an active asset management approach that includes an awareness of fees and tax.

A sophisticated wholesale approach backed by specialist managers

The true benefits to your portfolio come from taking a sophisticated approach to equities investing. Making the most of a complex and crowded playing field requires a high degree of expertise. That’s why we put as much work into picking managers for your portfolio as the managers do in picking the individual stocks. By bringing together specialist managers with distinctly different mandates and expertise, we can diversify your investments and meet the risk/return objectives of the Australian equities asset class.

We use the deep research capabilities and skills of our investment consultant to identify specialist managers to play distinct, but complementary roles in the overall portfolio strategy. Their team reviews and monitors the universe of Australian equity investment managers. Holding regular face-to-face meetings with the investment managers who look after your money. This is where the real value comes from – accessing the insights gained by experts asking the right questions on your behalf.

The choice of investment managers is made based on their quality and fit with our investment goals, as well as the way they work together with minimal role duplication.

They’re chosen because of their expertise in relation to the type of companies they specialise in – picking the best opportunities from larger ‘blue chip’, and smaller ‘mid-cap’ and ‘small-cap’ companies requires different expertise.

Part of your Australian equities portfolio has an allocation to a passive management approach which invests to closely match the ASX200 Stock Exchange index. This helps provide broad, cost-effective market exposure and provides a good counter-weight to our core group of active investment managers.

Your part ownership in Australian equities

Your stake in Australian equities gives you access to an engine room of long-term growth with real diversification. A sample of Mercy Super members’ total stake in Australian equities includes:

Commonwealth Bank $15.0m CYBG PLC $2.5m
BHP Billiton $13.4m Link Administration $2.4m
National Australia Bank $12.4m Goodman $2.4m
ANZ Bank $10.6m Challenger $2.4m
CSL $9.0m Origin Energy $2.4m
Rio Tinto $6.3m Crown Resorts $2.3m
Macquarie Group $5.4m Aurizon $2.2m
Bluescope Steel $5.3m Aristocrat Leisure $2.2m
QBE Insurance $5.3m BT Investment Management $2.1m
Graincorp $4.5m Cochlear $2.1m
Nufarm $4.3m Macquarie Atlas Roads $2.1m
JB Hi-Fi $3.9m Orora $2.1m
Fletcher Building $3.7m Resmed $2.0m
Lendlease $3.7m ASX $2.0m
Tabcorp $3.6m Downer EDI $2.0m
James Hardie $3.3m Star Entertainment $1.9m
Stockland $3.2m ALS $1.8m
Alumina $3.1m Charter Hall $1.8m
South32 $2.7m Orica $1.7m
Brambles $2.7m Janus Henderson $1.6m
Boral $2.7m Dulux $1.6m
Insurance Australia Group $2.6m Seek $1.6m
Iluka Resources $2.6m Ansell $1.6m
AGL Energy $2.5m Primary Health Care $1.4m

Estimated asset holdings shown are for illustrative purposes only and are based on fund-level sector assets at 30 June 2018 with proportional allocations for Australian equities held at 30 June 2018.

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