Wednesday, 6 April 2016

The first thing we tell you when markets experience bouts of volatility is not to panic. And for many reasons this is a logical response. We and other commentators say to you during these times that super is a long term investment, decisions shouldn’t be based on short term factors and that markets by nature move up and down. And this of course is all true.

Although any time you’re considering making a change to your investment strategy we’d caution that you ensure you’re aware of the long term implications of any decisions and that any changes are beneficial in meeting your investment goals.

So when markets turn volatile what does the Investment team at QSuper do? Well, you’ll be glad to know that when share market or commodity price moves are making headlines, it’s not usually a cause for panic! But that doesn’t mean that we’re not doing anything.

Behind the scenes there are a number of things we do every day in managing the shorter term asset allocations within the QSuper portfolio. And these things happen every day whether markets are benign or otherwise.

Ultimately regardless of what is happening in financial markets, we focus on asset prices and valuations. Each morning our Investment Strategy team meets to go over the previous day’s market movements. This is to understand and update the broader picture of what’s going on. This analysis can be fairly granular and looks at, for example, underlying asset price shifts, how they may be linked and any flow on effects etc.

Any changes that are made (within the asset allocation ranges of the Lifetime and Ready Made options) are based on market pricing. As essentially contrarian investors we look to buy assets when they are below a fair value or ‘cheap’ and sell when they are above fair value or ‘expensive’.

And of course material market movements can present entry and exit opportunities for investors like us so we’d look to assess whether any such opportunities are present. And there may well be times when we do nothing, for example if the longer term structural composition of the portfolio overrides any short term decisions.

Large asset price moves will also have implications for things like asset class allocation and the fund’s liquidity position. So from a housekeeping perspective, we work during these times to manage the liquidity of the Fund so that member payments and other liabilities can be paid as required. Any asset price movement will impact the asset class weightings within the portfolio and we may be required to rebalance more aggressively during times of material price moves.

You may have seen that for QSuper Lifetime and the Ready Made options we express these investment strategies as asset allocation ranges. We have the ability to move asset weights within these ranges and do so based on our forecast of asset prices. This enables us to proactively position the portfolio to give the best probability of meeting the investment objectives we target on your behalf. If you’d like to hear more about this process, please let me know in the comments section below.

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.