Investments

Justine O’Connell,  Senior Portfolio Manager, Balanced Option

What’s happening in investment markets?

Financial markets do not like uncertainty. What we are experiencing is not out of the ordinary. Over any 20-year period, we might expect 4 to 5 years where sharemarkets have a negative annual return. These periods of negative returns often occur after markets have had very positive returns. For example, the US stock market was up approximately 30% in the 2019 calendar year. And with the recent events, markets are back to where they were in the early part of the 2019.

The Coronavirus is having a similar impact to many other previous periods of uncertainty. The key issue for financial markets is the spread of the virus and the impact this spread has on the economy, due to restrictions on travel and decreased activity and demand for goods/services. To a large extent, financial markets have already priced a short, sharp downturn in economic activity. Likewise, financial markets are also pricing a substantial policy response from governments to support.

This impact has been compounded in recent days by the oil price. Saudi Arabia in particular has decided to maintain high levels of oil supply in face of decreased demand, which has severely impacted the oil price and value of oil producing companies.

The situation remains uncertain, and we continue to monitor the outlook, investment markets and the portfolio.

How are we responding?

AustralianSuper has built a team of over 150 investment experts who are trained to manage portfolios. Specifically, we do two things on members behalf

1. We build diversified investment portfolios. This approach reduces the volatility that our members experience, so that you can remain invested through market cycles. We do this by combining a range of asset classes including shares, fixed income, cash, property, infrastructure and foreign currency.

2. We monitor markets, economies and indicators and adjust the Fund’s investments and the strategy of each investment option to help maximize your retirement savings and manage risk.

Over the past two years we have decreased the risk in each our diversified investment portfolios, in part reflecting the strong returns from sharemarkets since the crisis in 2008 until recently.

 What you should consider?

History suggests that staying invested in the market may provide better returns over the long-term than trying to time the market.  When trying to work out what’s right for you, it’s important to consider your personal objectives, situation and needs.

If you have been invested in our diversified investment options over time, you would be aware that these portfolios have a history of strong long-term returns. For example, based on past investment returns, every $1 invested the Balanced option over the last 15 years, 1/1/2005 to 9/3/2020 is worth more than $3 now. Recent events have had a small impact compared to the cumulative effect of remaining invested over this period of time.

Investment returns are not guaranteed.  Past performance is not a reliable indicator of future returns.