Brad Holzberger, Chief Investment Officer
Like me, you may have read in the media today that the QSuper Balanced option is the top performing superannuation fund over 2014/2015. With a return of 12.5 percent, QSuper outperformed the median balanced fund return of 9.8 per cent by a significant margin1.
However what may not come across so clearly is the reason for this relative outperformance. We’ve spoken before about QSuper’s investment strategy. QSuper’s strong performance over the last financial year has come about primarily through diversification. We have maintained a broad spread of assets across the year and given our focus on diversification, this is how the strategy is designed to work.
Compared to many balanced funds QSuper holds a lower allocation to shares and within that a lower allocation to Australian shares. And bond returns for the portfolio (contrary to the general performance commentary) were actually quite good. This is significant because where most funds hold very low risk bonds, which means they get very little value from diversification, we hold long duration bonds which can increase the diversification benefits to the portfolio. Also our infrastructure, real estate and private equity portfolios did very well as did some of our other alternatives.
While it’s great our members have got a good result from the strategy this year, there will be some years it doesn't do so well compared to other funds. This is because the QSuper strategy is different to that of a typical balanced fund albeit one that seeks the same or better long term investment outcomes. Effectively it is a long term strategy designed to mitigate a number of risks, including the possibility of sustained low global growth and deflation.
In my opinion the good news for QSuper members is not necessarily that the Balanced option is the top performing fund over the 2014/2015 year, but that this investment strategy has met its investment objective over the longer period since its inception in 2010. If a fund is meeting its investment objective, or in other words doing what it says it will do, members can have a greater degree of certainty around which to plan for an adequate retirement income. Particularly so if a fund is consistently meeting its investment objective regardless of what the economic environment, financial markets and other funds are doing.
So despite today’s annual super return headlines, the key news for QSuper members is that the Balanced option continues to meet its long term investment objective. The table below shows the performance of the Balanced option compared with its objective over a number of timeframes. As you can see we have met or exceeded the objective over these longer timeframes. And in my view that’s the really good news.
QSuper Balanced option performance to 30 June 2015
3 years p.a.
5 years p.a.
7 years p.a.
10 years p.a.
1. The QSuper Balanced option for the Accumulation Account based on Chant West research. Past performance is not a reliable indicator of future performance. Chant West doesn’t take responsibility for any inaccuracy in the data. The Chant West rating shouldn’t be taken as financial product advice. Before you make any decisions about the product you should consider things like fees, the services and benefits offered and long-term performance.
2. To achieve a return of CPI + 3.5% p.a. after fees and tax, measured over rolling 10-year periods. The objective includes the periodic adjustment of the hurdle throughout time.
The views of the author and those included in the responses to comments posted on this blog are not necessarily the views of QSuper. This information is for general purposes only. It is not intended to constitute advice and persons should seek 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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Chief Investment Officer
As QSuper’s Chief Investment Officer Brad implements the investment policy of the Fund. In leading the Investments team this extends to developing investment strategy, leading QSuper’s research into investment philosophy and industry developments and contributing to the design of new products.