Are all superannuation investment strategies the same?
Not all superannuation fundsĀ invest in the same way, but QSuperās investment strategy is proving a standout in weathering the ups and downs of the market.
As financial markets across the world continue to be impacted by the coronavirus health emergency, QSuper is one organisation sticking to its long-term investment strategy and diversification approach to ride the market jitters and seek new asset opportunities that these market conditions may present.
The investment strategy employed by QSuper is to invest in a ārisk-balancedā way, focusing on risk allocation not asset allocation. This diversification approach is different to that taken by most other superannuation providers.
The strategy came about as a result of membersā feedback of their experience during the 2008 global financial crisis and was designed to give members a smoother ride and weather ups and downs during times of market volatility.
It is an approach that earned QSuper the inaugural 2020 Smooth Ride award from research agency SuperRatings (footnote 1) for giving members a smooth financial ride during a time of market volatility while also delivering members strong outcomes over the long term.
And more recently, QSuperās Balanced investment option has led the industry in investment performance over the past three months of extreme volatility and is an industry leader over 1, 3, 5 and 10 years, according to SuperRatings. (footnote 2)
What does the smooth strategy look like?
What the investment strategy means is that in QSuperās default investment option, and most other diversified options, there is decreased equity risk and increased exposure to other asset classes.
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These other asset classes are led by bonds, which tend to go up and down at opposite times to shares. It also includes direct infrastructure, real estate, private equity and alternative investments.
During the market volatility experienced around the response to the coronavirus pandemic, some asset prices, notably listed equities, fell across global markets. As a result, the portfolios of many investors with holdings in shares were impacted, requiring them to support the portfolio with cash injections.
During the same period, some assets have risen strongly in value. For example, QSuperās portfolio of high-qualityĀ sovereign bondsĀ generated solid profits as bond yields fell in anticipation of policy makers stepping in and lowering interest rates in an effort to stimulate the economy.
QSuper is also a large holder of cash, which positions it to take advantage of investment opportunities within the market and is designed to allow diversification.
The fund, with more than $113 billion in funds under administration(footnote 3) , has more than 20% of its assets in either cash or cash equivalents.
QSuper Chief Investment Officer Charles Woodhouse said that amount of liquidity had actually gone up since the start of the crisis.
āQSuper is a very liquid fund and that is absolutely by design,ā Mr Woodhouse said.
āWe are sticking with our strategy of being as diversified as possible so that we can create a smoother ride if we do encounter some additional volatility.ā
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Managing membersā money in a volatile market
Mr Woodhouse said market volatility was not new.Ā During the past 10 years, natural disasters such as the tsunami in Japan, political events such as Brexit, market swings duringĀ 2018 and now a global health event all impacted markets.
āQSuperās investment team manages their portfolios, our membersā money, with the potential for this sort of negative event in mind,ā he said.
āMost other super funds choose investments based on asset diversity, a certain mix ofĀ shares, property, fixed interest and so forth.
āAt QSuper, we pursue risk diversity.Ā What that means for our members in our diversified options is less exposure to share market risk and more exposure to other asset classes.ā
To find out more about QSuperās award-winning investment strategy visit qsuper.qld.gov.auĀ
Footnotes:
1. SuperRatings does not issue, sell, guarantee or underwrite this product. Go to www.superratings.com.au for details of its ratings criteria. Past performance is not a reliable indicator of future performance. Ratings, awards or investment returns are only one factor that you should consider when deciding how to invest your super.
2. Source: SuperRatings Fund Crediting Rate Survey, March 2020. SR50 Balanced Index (60-76), QSuper Accumulation account Balanced option only, ranked first over three months, third over one year and fourth over 10 years to 31 March 2020. Based on cumulative returns compounded annually after fees and taxes excluding fixed administration, contribution, switching fees and insurance premiums SuperRatings does not issue, sell, guarantee or underwrite this product. For details on the methodology refer to superratings.com.au. Past performance may not be a reliable indicator of future performance.
3 Funds under administration as at 30 June 2019. Net assets include the retirement funds managed by QSuper and employer-sponsor receivables for Defined Benefit members managed and held by Queensland Treasury.
Disclaimer:
Product issued by the QSuper Board (ABN 32 125 059 006, AFSL 489650) as trustee for QSuper (ABN 60 905 115 063). Consider the PDS on the QSuper website to see whether QSuper is right for you.
Any advice given is general only and is provided by QInvest Limited (ABN 35 063 511 580, AFSL 238274), without taking into account your personal objectives, financial situation, or needs. Refer to the Financial Services Guide (FSG) for more information. Ā© QSuper Board
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