How we are managing your Superannuation through the Market Volatility
We appreciate many of you will be feeling unsettled by the current and unfolding situation regarding COVID-19 (Coronavirus) which is impacting our lives and financial markets around the world.
We are seeing an increase in queries from Members regarding investment strategies at this time and we want to keep you informed about this quickly evolving situation.
Governments throughout Australia continue to respond by implementing social distancing and other measures to contain the virus.
While these measures slow the spread of the virus, they also carry an economic cost, with knock-on effects for businesses and employment. Our governments are taking steps to address these economic impacts.
Australia is well placed to address these economic impacts and has the financial capacity to do more if needed. We outline some of the assistance which Members can access from the government here: https://www.energysuper.com.au/why-join-us/news-centre/government-economic-response
Financial markets are reflecting the increased uncertainty and economic impact in lower share prices and higher bond prices.
In times such as this, it is worth remembering market volatility has happened before and there will be a point when the world and markets begin to return to some normality.
To provide some context to this situation from an investment perspective, our diversified investment options, which is where most of our members are invested, include Growth, MySuper, Balanced, Index Balanced, Capital Managed and Stable.
By being diversified it means we don’t have all investments in one particular asset class or type of investment. Instead there is a mix of shares, property, infrastructure, bonds, cash and alternatives, some of which are listed on financial markets and some which are not. This means that while these options won’t appreciate as much as a portfolio entirely made up of shares, in times when share markets are falling, it won’t lose as much in value either.
As an example, the significant fall of the ASX300 of around -25% (on a financial year to date basis to 20 March 2020), compares with the current return for Energy Super’s Balanced option of approximately -10.3%. On a rolling 10-year basis (after recent market movements), the return Members have received is around 6.3%*.
Energy Super uses active management through its investment portfolios which means that our investment managers will make informed decisions to make investments which they believe will outperform the market, particularly in times when there is market volatility.
Some current examples within Energy Super’s investment portfolios where we have investments that are performing well on your behalf include:
- Zoom Video Communications, Netflix, Amazon, Tencent, Alibaba, Microsoft and Okta which are all beneficiaries of most countries moving to work/shop/learn from home as social distancing measures are introduced;
- Regeneron Pharmaceuticals following news it is working on a coronavirus treatment; and
- Locally, there are also companies which have done well as the demand for essential goods and services has increased.
For long term investors such as Energy Super, significant falls in the price of investments creates an opportunity to purchase quality assets at a much cheaper entry point.
Investment managers are incrementally raising cash and waiting for opportunities to invest. However, with the ongoing volatility it remains difficult for them to do so with any conviction. Signs of progress on containing the coronavirus will be critical before investors regain confidence.
Areas of interest across Energy Super’s investment managers include:
- China and companies with trade links to China. As a major trade partner of China, Australian companies are well placed to benefit from when the Chinese economy returns to normal levels of activity; and
- Companies which have been indiscriminately sold as part of the broader market but are resilient, high quality companies that can meet obligations even in the most stressed situations. In Australia, there will be many companies who will fit this definition.
While further volatility is expected, Energy Super’s investment team continues to work to identify opportunities and to ensure our investment options are appropriately positioned for the outlook. We are monitoring virus containment efforts, financial and non-financial data, and markets closely as we continue to navigate through this situation to deliver the best outcomes for members.
We’re here to help
Before making a change to your investment strategy, we’d encourage you to speak to us.
We can help you make an informed decision based on your risk profile.
If you’re concerned, please call 1300 436 374, or drop us a line through our enquiry form, and we can call you back at a time that works for you.
*Investment returns are not guaranteed. Past performance is not a reliable indicator of future performance.
This article was prepared in April 2020 by Electricity Supply Industry Superannuation (Qld) Ltd (ABN 30 069 634 439) (AFSL 336567), the Trustee and Issuer of Energy Super (ABN 33 761 363 685), and may contain general financial advice which does not take into account your personal objectives, situations or needs. Before making a decision about Energy Super consider your financial requirements and read the Product Disclosure Statement, available at www.energysuper.com.au or by calling 1300 436 374.