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QSuper’s Annual Investment Update takes you inside the minds that manage your investments, to hear first-hand from senior members of the QSuper Investment team.
Each year at multiple events across the state, QSuper’s Investment team meet with QSuper members, to provide insights on current industry news and investment outcomes, as well as QSuper’s investment philosophy and strategy. They also welcome the opportunity to answer the questions that are on our members’ minds.
Registrations are now open to attend the Annual Investment Update – your opportunity to hear first-hand from senior members of the QSuper investment team.
Q: Does QSuper factor climate change into its investments?
A: Climate change is a risk which is poorly understood in its application in investment markets.
In the socially responsible investment option, of course, the issues of climate change and other environmental issues are prominent. The managers of that investment option monitor it closely and move investments around in response to their assessments of changes in climate.
In the QSuper investment options such as the Balanced and Moderate, we of course maintain an awareness, as do the managers who work for us, but not to the same degree as the socially responsible option. There is a more balanced application with climate considered one of many issues that could impact long-term returns.
Regarding the management of our specific assets, such as Heathrow for example, we trust the appropriate management of issues such as carbon emissions and fossil fuels are within the regulations. In the last couple of years, we have employed specialist staff to look at this issue, and our Board and Investment Committee are also actively considering our approach now and into the future, but it is early days. In summary, climate change is a part of QSuper’s investment thesis; a small but growing part.
Q: How much of a role does asset price inflation play in QSuper’s returns and in your plans from an investment management perspective?
A: In short, a lot. More than half of the returns you have seen over the past five to 10 years have been due to asset price inflation. Overall, about a third of the total returns of the Balanced investment option would be in yield. The rest of it is asset price inflation which goes up and down and that’s what creates the volatility.
Q: At the Annual Investment Update a few years ago, you mentioned that QSuper was looking at investments in less developed parts of the world. Can you provide us with an update?
A: In terms of emerging markets, we do have a fundamental policy to further research and potentially move the assets of the Fund more into those markets. At the moment we have very little investment in emerging markets, but that does not mean we are unaffected by those markets. A lot of the assets we own have an indirect effect as a result of emerging economies such as Asia and Africa. For example, a lot of the people that fly into Heathrow come from Asia and South America.
In terms of precisely owning assets in less developed parts of the world, we are looking at a strategy goal of around 30%. We have staff in place who look at nothing but investments in places like South America and China. One of the problems we have is that the assets we have bought in these markets have done so well that we have already sold them. Every step we take will be tested; it will be incremental, but it is happening.
Q: With regards to Australian and International shares, how does QSuper choose which companies to invest in?
A: We aggregate the QSuper portfolios based on the size of the markets in the various countries as well as the size of the company within the market. The US, for example, is a big market and therefore has a big share as a country. Larger companies in the market are over-represented and therefore we attempt to diversify a bit away from them to get sizeable shares of smaller companies as well. What that gives our members is a balanced capitalisation, a very global portfolio of international shares and a still large exposure in Australia with both large and small companies. It is designed to be diversified and stable.
Q: Is QSuper looking at introducing a deferred annuity product or is that being affected by government regulation?
A: We understand longevity risk. It is a clear problem all of our members face because nobody knows how long they are going to live. The arrangements around deferred annuities in Australia are very new. There are deferred annuities available, but it is a narrow market. We are taking our time with this as we are moving it through in a meticulous and prioritised way.
What we have to do is marry up our thinking with the legislative framework. The Federal Government has been talking for quite a while about retirement products to address longevity risk, but there is currently no legislative framework to support it. It is very uncertain at the moment. A key consideration for us is the value to our members. Products cost a lot of money to bring to market, so we need to find a way to make that kind of product valuable to all our members if it is optional versus it being a default for everyone.
The QSuper Board have had debates about longevity risk and we all agree that we would love to be able to talk to you about the options we can provide you, but we can’t do that yet. Be assured that we have done a lot of work on analysing and modelling a solution that we think would benefit QSuper members.
We are involved in direct talks with Federal Treasury on this issue to get this issue finalised as soon as we can as we believe it is an important product.
Don’t miss this opportunity to meet other QSuper members like you and ask questions of the people working for you. If you can’t make it to QSuper’s Annual Investment Update in person, you are invited to livestream the event online.
The views of the author 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. Each of our investment options has a different objective, risk profile, and asset allocation.
The term ‘QSuper portfolio’ is used to refer collectively to the underlying portfolios of assets that in combination make up the individual asset allocations of the QSuper Lifetime, Balanced, Moderate, and Aggressive investment options.
Past performance is not a reliable indicator of future performance.
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