Hello and welcome to Super Insider, Australian Retirement Trust's podcast and web series that is all about investments, the economy, and strategies to make sure you maximise your retirement savings.
My name is Anne Fuchs. I'm head of Advice and Guidance at Australian Retirement Trust. The team and I love helping our 2.2 million members make the best possible decisions about their retirement savings.
We're sitting here today on Turrbal and Yuggera country, and I'd like to pay my respects to Elders past, present, and emerging.
Now, Super Insider is about bringing all of the inside knowledge to you, our members, so that you feel really confident and empowered about your retirement savings.
And I have to say, we've got another sensational guest on Super Insider, Liz Kumaru. Liz is our Head of Private Corporate Assets here at Australian Retirement Trust. She has 25 years of experience and has so much investment knowledge and expertise in her head.
So, today, it's my job to try and extract some of that knowledge to help you understand and think about what may be the right investment choice for you. You would have maybe heard Brian Parker and I talk a lot about the economy and investments, and today it's just going, I guess, that step further in terms of really understanding how to approach investing for you so you do get the most out of your super. Now, Liz, welcome.
Thank you. It's great to be here.
Yes, and you get the joy of our general advice warning before we begin. So, over to you. So, we get the big tick with Compliance.
Of course, yes. Before we begin, I need to let everyone know that what we're going to talk about today is general information only. Any advice doesn't take into account your personal situation. So, you should consider your circumstances and think about getting personal advice before acting on anything we discuss. You can also get a copy of our Product Disclosure Statement from our website or by calling us on 13 11 84 if you have a Super Savings account, or 1300 360 750 if you have a QSuper account.
Hip, hip, hooray! That's done. Okay, gold star for us. Now, where do we begin? I know I talk about my kids, have just started working and have got their first Australian Retirement Trust account, and are interested investors. And then equally I know quite a few old people, in their 70s or older people, older Australians, who are in their 70s and as just as interested as the young people. So, I guess where do we start in terms of investment strategies, and how do you as an investment team approach this huge lifespan of people that we have to grow and invest money for?
It might be worthwhile just starting with saying, what is an investment strategy?
[Anne] Oh, good idea. Let's start with that.
So, an investment strategy is the plan or the different mix of assets that are most likely to achieve the objective that you're trying to achieve. And it's not that different - if you can use buying a car as an analogy. You go buy a car, that car will get you from A to B, but you'll have certain preferences, requirements, and objectives from that car. You might prefer a red car.
[Anne] I prefer a German car.
Or you'd prefer a German car.
[Anne] I'm married to a German.
Yes, you might have a big family and so you need a car with lots of seats. You might think about taking it off road, so you might need a four-wheel-drive. That is the personal circumstances and preferences that will determine the type of car you buy. An investment strategy is not that different. You need to think about and understand your personal circumstances, preferences, and objectives of what you want to achieve in retirement, and that will help you understand what type of assets and investment strategy suits you to meet your objectives.
So do you think - to that, you know, starting out where I mentioned, teenagers versus people in their 70s or 80s. Is it possible, with that explanation, that at either sort of end of the bookend of life stages around investing, you could have a similar mindset to investing, couldn't you? You could have similar needs around your appetite to risk, for example?
It is possible. So, age is definitely one determinant that you should consider when thinking about investment strategy that you should use. So, in your early years, there is a long time before you retire, and you are still working, and you can still deliver an income. So, you may actually be capable of tolerating some higher risk investments because those higher risk investments, growth investments, like shares, for example, can have a higher expected return over time, but they can have volatility.
I know, Liz too - sorry to interrupt you, but some of the portfolio that you've got, private debt and private capital, and some of those, are they growth assets, too?
Yes, so very happy - maybe I should walk through the different types of investments that you can find in different investment options. So, the very one that we've already spoken about is shares, and that is owning a piece of the company. It's also sometimes referred to as equity, and that means that, if the company does well and earnings grow, you will be a beneficiary in that because you own a piece of that company so you will do well as well. But equally, if that company has challenging times, that will impact the value of your investment. So, it has the possibility of delivering strong returns over time, but it can have some bumps along the road, and there is a higher risk of more volatility. An example of that is buying shares in Woolworths or Coles, if you shop in those supermarkets.
So, if you buy shares in in Woolies and Coles, to the extent that they deliver a good profit, you will benefit from that as well as a shareholder. Cash is another option, and that is literally putting money in a bank and generating a yield on that money. And I think we all know that the cash rate you're getting today is better than it was only a little while ago. And then you've got fixed interest, which are also known as bonds. And fixed interest is where I will lend you money, and in order for me to give you money, you need to pay me a dividend yield. And there's a really diverse range of fixed interest or bond investments. You can have low risk if you lend money to a government. That's pretty comfortable that you're going to get that yield and that money back. So, the yield that you get from that is relatively lower. However, if you give it to a company that might be a little bit stressed, in order to incentivise you to lend that money to them, you're going to want a big return. And so, there is a big range of different types of fixed interest instruments that you can invest in. And then you can go to what we refer to as our alternative asset classes, which you talked about before. And broadly speaking, they're unlisted. So, you can't buy them on a standard stock exchange. They're much more difficult to access, but there is a huge opportunity set out there. And so, you were talking about private equity. Just like there are companies that are listed on stock exchanges, there are hundreds of thousands of companies that are operating profitable businesses that aren't listed on stock exchanges.
It would be impossible for people, just as an individual, to go and invest in these. So, this is why super is so exciting and cool. Who would've thought? Because you can invest in these amazing companies that you wouldn't be able to otherwise.
Absolutely. One of the most amazing things of my role is that I get to see some very unique and very different investment opportunities coming across the desk. An unusual one that came across the desk yesterday was a ropes business.
[Anne] Ropes.
Ropes as in tough ropes that they use in marine. So, it's ropes and nets that they use in marine and commercial-grade use. Things that you just don't think about. There's software that does the online booking services. It's just an extraordinary breadth of opportunity set that allows you to access to good investments.
I guess to your point earlier around you as an individual member thinking about what may be the right investment for you, Brian Parker always talks about 'sleep at night should never be overrated'. And if you're losing sleep at night, it means maybe it's your body telling you you're taking too much risk. So, what would that mean, then, taking too much risk in the context of those assets that you were just describing for us, Liz?
Yes, it's a really great question, and I still think back to after the global financial crisis where my mother, like many members, received her statement at the end of the financial year and opened it up and realised that there was a big negative. It had gone backwards, and she phoned me and said --
[Anne] And blamed you?
And she did, the very first question was: should I move to cash?
[Anne] That old question.
That old question. Right at the time when equity markets or share markets had dropped considerably. And had she moved to cash at that time, we all know with the benefit of hindsight that the markets have recovered fully, she would've locked in those losses. So, that risk tolerance question is a really important one upfront, to understand what is going to make you sleep at night. If you think that you are going to sit up at night being terrified that your balance is going to fall because there is share market volatility, then perhaps you need to think through your strategy, because the last thing you want to do is not understand that those ups and downs are a part of that asset class and lock it in at the down point.
Spot on. I guess it's that thinking about, well, what is this superannuation? Where am I in my life and what do I need it - if it's just sitting there accumulating, to your point earlier, you've got more runway to be able to take more risks. But if you're in your 70s or 80s and you're drawing down an income, you can understand why people are worried. They don't want their income payments to go backwards, because cost of living is a challenge, and equally they want the money to last. So that potentially - I know many of our members like to leave a legacy.
Absolutely, and that's where age comes into consideration and thinking through what may be the right investment strategy for you personally. If you are retired, you're not bringing in a salary from your work anymore. So, perhaps you need investments that are lower risk and that are income generating. They're the type of questions that you need to understand.
So, how would you then, at that point, if you're at that retirement point, and you're drawing an income, what's the traditional type of portfolio? How does it look in terms of allocation to those different pots of assets that you were talking about, Liz?
So, it can vary, and Australian Retirement Trust has a series of different options depending on your personal circumstances. Because some members can have large assets externally in addition to their superannuation fund. So, there is no one size fits all strategy. However, Australian Retirement Trust does have a default option. So, if you are not ... If you're happy to just go with the default option, meaning that you don't make a selection of the different types of investment strategies, the strategy that Australian Retirement Trust builds is a diversified portfolio of opportunity that aims to generate wealth over time, that progressively increases its exposure to low-risk investments as you get close to retirement.
So, things like fixed interest and cash.
Yes, and also, we were talking about some of the alternative asset classes. Things like infrastructure, for example, can also be in there. They're assets that offer essential services to society, which means that their earnings and income is not necessarily generated to the global economic cycle. So, they can provide a nice diversifying return stream. And just to give an example of what are infrastructure assets, things like roads, airports, utilities, communication services. Some of the assets that are in the Australian Retirement Trust portfolio that you'd be very familiar with are Melbourne Airport, Brisbane Airport.
[Anne] Gold Coast.
Well, you may have also just actually seen the recent, a year or so ago, investment in Amplitel. So that's the big mobile network towers. So, they're all investments that access to a large superannuation fund can access. Some other options or investment types that are available is property or real estate. There's very broad access to assets in there as well.
I think for the members or our viewers watching, the return, the net return, after fees is obviously really important also, because fees do play a role in terms of what is the actual performance that you're getting from your super fund. So, what would you say, what's your advice to our viewers and listeners around fees and the different types of fees for these different asset classes?
Fees do matter, so it is important to understand what fees are being charged, and that you are getting good value for money. It is important to note that different asset classes do have different costs. So, something like those unlisted assets that we're talking about, they do cost more to transact, more due diligence, but the expected return is expected to be higher to compensate you for that, or the expected diversification benefits are expected to compensate you for that.
And how would the fees vary between, say, actively managed type of portfolios versus an index approach in the shares? And I'm talking in relation to shares.
Yeah, so in public share markets where you have a company that is actively trying to add value by choosing one company or investment over another, that comes at an expense more than if you were just replicating an index. You need to pay for that company to do the diligence, the time, energy, and effort to make those picks. So, you would expect to pay a higher fee in actively managed strategies relative to passively managed strategies.
So, if you were to give our viewers and listeners one bit of your expert advice if they were thinking and looking at - they've logged into the app, into Member Online, and they're thinking, whether they're 25, 35, 65, whatever, they're looking and going, 'I'm not sure. Is this the right investment option for me?' If they're generally curious, what would be your ... what would you say to them?
So, education is always incredibly helpful. I think, like anything, at first you can get overwhelmed by different terms not, knowing what they mean. So, education - and I know this is going to be right up your alley. Private advice. It's something you're incredibly passionate about. But getting personal advice is incredibly helpful because it gives you the confidence to understand that plan that you have in place, understand the likely ups and downs, which will give you the confidence to ride through that journey and maximise your outcomes over time. But, of course, if you do have any questions, you can call our contact centres here at Australian Retirement Trust.
And, you know, you're right, Liz; everyone's situation is different, particularly the closer you get to retirement. That's when, you know, the rubber really hits the road about your personal circumstances. Do you have an investment property? Do you have other assets? How much do you need to rely on the Age Pension? Do you have a partner or not? What's your health like? How long do you need that money to last? All of those things will factor into the right investment option for you. And if you're not paying attention, you're with a super fund that absolutely has the best-in-breed investment professionals like Liz here today that are pulling together portfolios for you so that you can sleep at night, and we are protecting your money and looking after it so you can just live the best possible retirement. But, Liz, I really appreciate having you on here today, and I have to say it's wonderful to see - I'm just going to do a shout-out because I
the investment world has always been dominated by men. You and I are a similar vintage, so it's just wonderful to have an investment professional like you who's achieved so much. You have a portfolio that's just extraordinary, and you've got teenagers or young adults as well and you sort of have this ability to do it all. So, just wonderful to have you on Super Insider if I can say so.
Oh, it's lovely to be here and thank you, and hopefully you found it helpful.
Yes, and if any of our viewers or listeners have any questions, we have so much content on the website, and we have obviously lots of other investment content on YouTube, and you can obviously download us or watch us - or listen to us, I should say, on Spotify. I always mess that up. Or on Apple on that streaming podcast app there on your phone or iPad. So, thank you very much for joining us on Super Insider, and we look forward to you joining us again soon.