Focused on a smooth ride in a turbulent year
23 November 2020
5
min read
Chief Investment Officer Charles Woodhouse addressed QSuper’s first Annual Members' Meeting on 10 November 2020. Here are his thoughts:
Thank you for your interest in how your fund is operating to serve your best interests and thank you for your ongoing support of a strategy we believe continues to deliver for you.
We have come through a turbulent year and face the prospect of more turbulence both at home and in the rest of the world, as the impact of the coronavirus pandemic and other political shifts flow through the value of investments, their earnings and ultimately our superannuation balances.
Our objective has been and continues to be to offer you assurance through this turbulence, to give you a smooth ride that can give you confidence that your retirement years can be your best years.
A strategy designed to weather ups and downs
I have just completed my first year as your Chief Investment Officer and I want to acknowledge the strength of the strategy and the team I inherited and, in fact, have been a part of for more than a decade. As we have explained frequently, we set out after the global financial crisis to develop a strategy that would weather volatile markets while delivering strong returns.
The strategy was made for the times we are now in. Our fund is in good shape, highly liquid and in a position to take advantage of investment opportunities that will arise from the shakeouts in markets around the world.
The current downturn is unlike others in living memory in that it is simultaneously universal. This is not just an economic downturn, but a downturn determined by a health issue that remains unresolved.
The rebound in markets since their fall in March – the V-shaped recovery – is driven by unprecedented levels of debt-funded government stimulus, which is not sustainable. This points to lower levels of economic growth, hence lower investment returns, over the foreseeable future.
Capital preserved through a volatile time
The purpose of the Annual Members’ Meeting is to hold ourselves to account to you, the members, and I will cover some issues I believe are important to your interests.
Our investment performance is covered both in your individual statements and the annual report, which is now available. Our balanced fund ended the year lineball with where it started. We would have liked a better outcome but take comfort that we achieved better than many of our competitors and have preserved your capital through a volatile period.
We achieved this by sticking with our strategy which promises diversification across asset allocations and asset classes."
This has seen us need to react quickly to adjust our tradeable holdings while also keeping a close eye on the valuations of our long term unlisted assets which provide the ballast in our portfolio.
Some of those, such as airport interests, have obviously been affected by the slowdown of travel caused by COVID. But we are confident their value will begin to recover as the world either learns to live with the risk of COVID or a vaccine or more effective treatments are developed and deployed.
Our most high-profile airport, Heathrow, has advanced plans on how it will rapidly recover when travel recommences. Some of our other unlisted assets, such as energy facilities, are unaffected by the virus. And some of our real estate, such as office buildings leased to quality technology tenants, have had their values enhanced.
Challenges for the year ahead
Our team has ensured valuations across our assets are current and are reflected in published unit prices.
We came through the worst of the year’s financial volatility highly liquid, even allowing for the cash drawdown required to meet the needs of the early release scheme designed to help members in need of financial support.
The challenge over the coming year will be to find assets that can go near to matching the return levels we have achieved over the past five years. We see evidence of opportunities arising but you can be assured we will approach them with the same rigour we have applied to all our previous investments.
Our investment decisions will be guided by the quest for strong, stable returns and they will be supported by the reputation QSuper has built as a patient and supportive investor strongly sought after by innovative partners."
QSuper has the capacity to be a strong investor in the rebuilding of economies that naturally will follow the COVID crisis – whether that’s as a funder of public and high quality private debt or as an equity partner in much-needed infrastructure or some of the business opportunities that will arise.
Our ability to identify those opportunities and react quickly to them underpins the delivery of our strategy of diversification which creates the smooth ride we try to deliver.
Beyond the delivery of the strategy this year, we achieved several significant milestones during the COVID crisis. We successfully transferred management of our Socially Responsible investment option to inhouse capability based on the belief that we could replicate the skills applied in the rest of our portfolio in an option which had been outsourced.
We are well aware of the increased investor interest in making what are deemed socially responsible choices. I’m pleased to say that an investment option that held $350 million in July has grown to close to $500 million.
It is differentiated from other such options by its focus on positively choosing investments with a positive social outcome, not just eliminating those seen to have a negative impact. Its holdings include renewable energy investments, healthcare holdings and a growing portfolio of green bonds."
Your fund is mindful of the rising investor activism and the need to balance desire for investment in sustainable industries with its obligation to invest for the sole purpose of maximising members’ interests.
We are active in our stewardship program to encourage businesses we invest in to both understand and act on their environmental impact. And we are in the process of developing a full environmental, social and governance framework, which will guide how the fund deals with these issues well into the future.
You can be assured that QSuper will step through this carefully, recognising your interests come first and recognising that sustainable investment is wise investment.
We are fortunate at QSuper to have a stable team able to deliver on our promise to you. The counsel of the investment committee, our trustees and executive colleagues supports this and we look forward to continuing to take you on that smooth ride.