Risk is a part of everyday life. We all manage risk every day, even if we don’t know it. When we set an alarm clock in the morning, we’re avoiding the risk of sleeping in and being late for work. And when we take an umbrella when we go out, we’re protecting ourselves against inclement weather and getting wet.
When we move into an investment environment, we need to think about risk a little differently. Risk is not just about ‘what might go wrong’ but rather covers anything that might impact on our ability to meet the investment objective we target on your behalf. To reach a particular investment goal, typically a return above the risk-free rate1, we need to take on some risk, but the question is how much and what type of risk? And of course, we want to ensure that we’ll be appropriately compensated for the risk borne over time. Therefore our role is a balancing task, weighing up the probability of positive and negative outcomes.
In saying this, you could describe our role at QSuper as being somewhat of a ‘risk’ juggling act. Our Investment team are all risk managers when assessing where to best invest on behalf of members. Large cap stocks, value stocks, real estate, commodities, emerging markets, term deposits, bonds and private equity are just some of the investments we hold. On top of this we also manage the liquidity of the Fund to ensure cash is available for the payment of benefits, investment option switches by members and the purchase of assets and so on.
When we’re juggling all these different pieces, we must give careful consideration to how they contribute to the overall investment objectives we’re targeting. Adding to the complexity of the act, we structure different strategies for the different objectives, many of which we’ve spoken to before:
Our approach is well-documented throughout this blog. Ultimately we’re here for one purpose – to deliver an adequate income in retirement for our members, and we look to do this by delivering stable investment returns, while recognising that different stages of life and assets will likely require different investment strategies.
We have some big ideas and we’re happy to do things a little differently at QSuper. But naturally we apply caution and hold a desire to ‘get things right’ above all else. That’s why we’ll continue to take a measured and steady approach to balancing the risks.
1 In theory the risk-free rate is the minimum return an investor can expect for any investment with no risk of financial loss. In practice, even investments considered to be ‘safe’ carry some form of risk. Typically the risk-free rate is based on a low risk bond issued by a government where the risk of default is minimal.
The views of the author and those who provide the responses to comments posted on this blog are not necessarily the views of the QSuper Board. We’ve put this information together as general information only. You should get professional advice before relying on this information.
Past performance is not a reliable indicator of future performance. Each of our investment options has a different objective, risk profile, and asset allocation.
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