Investment insights

Want to know the stories behind the numbers? We had Chris talk us through the latest market activity and what’s on the horizon:

After more than a decade in the Qantas Super team, Chris said the last few months have been among the most interesting he’s spent in the job.

“In the 10 years that I’ve been at Qantas Super, I’ve never seen as much change in markets as we have in the last three months or so,” he said.

The recent activity has been across fixed interest and alternative investments.

“We’ve had a really tight environment since the global financial crisis [GFC]: for years, central banks around the world were concerned about getting inflation back up through stimulatory policy and keeping interest rates relatively subdued,” Chris explained.

“Then COVID hit and following supply constraints combined with strong demand, now inflation is at levels where central banks are unhappy, which means interest rates have gone up at one of the fastest rates we’ve ever seen. All of this is providing interesting opportunities for our team.”

For example, with 10-year government bonds returning around 3.8%, they have now become an attractive investment, Chris explained.

This will continue to be an area of focus and change as central banks act to bring inflation down. The Reserve Bank of Australia (RBA) increased the cash rate again at its February 2023 meeting, bringing it to 3.35% as CPI inflation hit 7.8% over the year to the December 2022 quarter, the highest it’s been since 1990. In making its decision on the cash rate, the RBA stated it expects CPI inflation to decline to 4.75% this year.

But while some changes have been made over the last few months, Chris reminded us that super is a long term investment and, accordingly, the team has also been focused on opportunities that have a long term view.

By way of example, the Investment team has been researching interesting alternative investments in agriculture, sustainability and decarbonisation, focusing its research on well-priced private market ideas that aim to generate strong returns for members over the long term.

Sustainability and decarbonisation are particularly interesting themes, with the continued focus on the issue showing how far we’ve come since the GFC.

“We were thinking about sustainability back then, but then the GFC hit and the focus fell away because people were worried about paying off their mortgages and keeping their jobs,” Chris said.

“While we’re seeing a lot of dislocation now, I think the market consensus is that sustainability and decarbonisation is important and unlikely to fall away again.”

The importance of these themes is shown in the concrete goals many investors have set around them; for example, Qantas Super continues to work towards achieving net zero carbon emissions across our investment portfolio by 2050.

Just over a year on from Russia’s invasion of Ukraine, Chris said the investment team continues to keep an eye on the situation.

Beyond the human impact, much of the conflict’s impact on global markets has lessened. While major disruptions were predicted due to Russia’s cutting of energy supplies to Europe, for example, Europe has worked over the last year to get its gas supplies back up and minimise issues.

Looking elsewhere, the team is also keeping an eye on China, which effectively ended its COVID-zero policy in December 2022.

While this will provide a positive boost in the short-term, with the return of tourists and Chinese students to Australia in particular expected to give our local economy a bounce, Chris said a number of key structural issues remain for China.

With the country’s birth rate falling for the past six years, China’s population officially declined in January 2023. This was the first population decline for China in 60 years, with experts predicting it will have various implications for the nation’s economy.

Also of continued concern is China’s property market, with the International Monetary Fund stating in early February 2023 that more action was needed to end the real estate crisis.

The real estate crisis made global news in September 2021, when the country’s second-largest development company sparked concern after it told its investors that it would not be able to make interest payments on time.