Q&A with Chief Investment Officer, on super and COVID-19

AustralianSuper’s Chief Investment Officer, Mark Delaney, discusses the impact COVID-19 (Coronavirus) is having on investment markets, its effect on super balances, and what the Fund is doing to help protect members’ retirement savings.

COVID-19 (Coronavirus) and its impact on investment markets

QU: What’s your perspective regarding what’s happening in investment markets? 

MD: The Coronavirus was an unanticipated event and negative news associated with it is causing a lot of uncertainty, which is resulting in higher volatility in investment markets.

We’ve been seeing swings up over 5% one night and down 5% the next, which is a very reactive response to the news. The news is being driven by updates on the virus, economic data and the government responses as they try and contain the virus, as well as companies announcing negative news. All of this is contributing to the uncertainty.

At some point in the future the uncertainty will resolve and at this time we may expect to see investment markets return to behaving more rationally.

 

Members’ super balances

QU: What would you say to a member who is concerned about their super balance at the moment?

MD: I would say it’s very normal to be concerned in this environment, however history can be reassuring.

Markets, up until February this year were trading at all-time highs. So at times like this, when you might look at your super balance and worry, it’s really important to remember the last 10 years have been really good. Don’t be despondent over the results of the last few weeks. Try and focus on the long term.

Over the long term, say a 20-30 year investment horizon, this period of a couple of weeks or months will be immaterial relative to the wealth you will have generated over the period before.

If you have had money invested in the Balanced option you have received positive returns for the last 10 years, that’s financial year-to-year. It’s also worth noting that over a 20-year period we experienced negative returns in only 3 years, 2 of these were in 2008 and 2009 – during the GFC. 

So, you have to remember that and focus on the wealth you have gained over those time periods, rather than the previous weeks. And when thinking about what you should do, consider your personal objectives, situation and needs.

 

AustralianSuper’s Balanced option

QU: How is the Balanced option positioned to weather this volatility? 

MD: The Balanced option, where most members are invested, has investments across several major asset classes, which means we have eggs in lots of different baskets. We are invested across shares, overseas shares, bonds, property, infrastructure, corporate debt and cash. The benefit of diversification offers a measure of protection. Diversification can help smooth out the ups and downs of the market.

The Fund took the position over 2019 to take a little bit of risk out of the portfolio by slightly reducing our exposure to equities. We thought this was t/he right thing to do given where we thought we were in the economic cycle.

‘The Balanced option is diversified across several major asset classes, which means we have eggs in lots of different baskets. The benefit of diversification offers a measure of protection. It can help smooth out the ups and downs of the market.’
QU: Do you see the situation resolving soon or not?

MD: We expect uncertainty and volatility to be a feature of the market for some time. Volatility is unlikely to resolve until a level of certainty returns and this could be when there are fewer new cases of Coronavirus being reported and/or governments are able to manage and coordinate their responses from a global perspective.

QU: What will that mean for the portfolio?

MD: As far as what it means for the Balanced option, we already knew we were nearing the end of an economic cycle, and we also know that at the bottom of an economic cycle – when the news is very grim – it can be the best time to invest. So almost certainly there will be opportunities from an investment perspective.

READ MORE: COVID-19 IS IMPACTING INVESTMENT MARKETS AND YOUR SUPER


QU: What are your final thoughts on these current events in the scheme of things?

MD: It’s really important to maintain perspective, and understand that at AustralianSuper your retirement savings are being managed by over 150 investment professionals who are trained to manage and guide the portfolio through these market events.

We’re also not letting short-term volatility cloud our judgement. We’re not allowing ourselves to lose sight of the long-term rewards and we continue to manage the portfolio for the long term.

Yes, we have seen similar events before, and I’ve said it previously that at the time they seem terrifying. It’s important to focus on the long term and trust that the bumps will be ironed out when looking at your retirement savings balance over a long-term horizon.’

READ MORE: AUSTRALIANSUPER’S RESPONSE TO COVID-19

 

HOW WE INVEST

 

 


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

This information may be general financial advice which doesn’t take into account your personal objectives, situation or needs.  Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898. 


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