Wednesday, 28 October 2015

Each year, as part of our member seminar program, the Investment team delivers an Investment Update. This seminar focuses on three things: our investment performance outcomes, the team’s current investment views and outlook, and a feature topic, which this year is post-retirement investment strategies.

Our regular attendees, who are usually interested to hear about our investment views, may be surprised as we continue to build on a thesis we’ve been developing for a number of years which is that we’re in a ‘low return environment’.

Why would this be surprising? Well, members have heard us promote this view for a number of years only for us to turn up the following year to announce we’ve delivered strong annual returns. As an example, the return for the Balanced option for 2014/2015 was 12 per cent with an average return of 11.5 per cent per annum over the last three years. So for us to talk again about a low return environment is beginning to feel a little like the boy who cried wolf!

So have these strong returns changed our mind? In short the answer is no. We continue to believe we’re in a low return environment, and this is driven by the lower than normal cash rates we expect going forward. While we view the outlook for global growth as reasonable, we are mindful of the elevated debt levels of households and governments around the world. With inflation likely to be contained, these factors combined should continue to require lower than normal cash rates.

Cash rates are the building block to investing; they inform the rate at which you can borrow to invest and/or form the basis of your expected return for providing capital (once adjusted for risk). So if cash rates remain low, all investment becomes challenging.

So why highlight this? Well we believe it’s appropriate for us to inform you, our members of these implications so that you can take action if required. This may include seeking advice, increasing contributions and/or reviewing investment strategies. For our retired members who draw regular income payments, the Investment Update highlights the need to review your investment strategies in the context of potentially lower returns.

It is worth remembering that we have as a starting point enjoyed a period of strong returns that have already been ‘banked’ into members’ accounts and that should a low return environment eventuate that this will impact all super funds, not just QSuper. The challenge for us as always will be to build portfolios that are sufficiently robust to mitigate the risks and to capture the opportunities presented in this environment.

If you’d like to know more or register for any of the seminars we’re currently running please check out our website.

^ Visit our investment options section for more detailed information. Changes to inflation, fees, asset allocations, option objectives, and risk, play a significant part in the return of any investment option.

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 and 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.