After a difficult end to the March 2020 quarter, investment markets rebounded during the June 2020 quarter, allowing each of Qantas Super’s investment options to make some gains to close out the 2019/20 financial year.

While falls in share markets were the talk of the March 2020 quarter, Qantas Super investment manager Chris Grogan said the June quarter was the “polar opposite”.

Share markets and private equity performed well from April to the end of June, buoyed by the fiscal stimulus from Governments around the world, news of different countries easing restrictions, and positive developments on a COVID-19 vaccine.

Once again, this shift highlights the importance of building well diversified portfolios with investments that complement each other. Qantas Super’s investment options are invested in over 5,000 investments globally, which in addition to shares, also includes property, infrastructure, timberland, agriculture, a variety of bonds, and cash.

Having your super spread across different types of investments helps smooth the ups and downs that may be experienced by any one type of investment, and helps your super to perform over the long-term.

Performance for super accounts

As at 30 June 2020 – all returns are per annum and after investment fees.

Investment option1 year3 years5 years6 years7 years10 years
Glidepath: Take-off-2.8%5.8%----
Glidepath: Altitude-1.6%5.3%----
Glidepath: Cruising-1.0%5.1%----
Glidepath: Destination-0.9%4.5%----
Aggressive-2.8%5.8%5.8%6.4%7.6%7.9%
Growth-1.6%5.3%5.3%5.7%6.6%7.0%
Balanced-0.9%4.6%4.4%4.8%5.6%6.1%
Conservative0.1%3.9%3.8%4.0%4.4%4.9%
Cash1.2%1.6%1.6%1.7%1.8%2.4%

Past performance is not a guarantee of future performance.

While 2019/20 may not have delivered the results members were expecting at the outset, it’s important to remember that the year has presented ‘unprecedented’ challenges.

That word may now be a cliché, but the summer bushfires, followed by floods and then a global pandemic, have been an historic, once-in-a-lifetime series of events that have up-ended not only investment markets, but many of the world’s norms, in a matter of months.

As the world looks to recover and take steps back to normal, Chris reminded us that it’s important to focus on super as a long term investment.

Despite the difficulties of the last six months, each of Qantas Super’s investment options continues to deliver over the long term.

In fact, this is the first time in more than 10 years that our Growth option has delivered a negative return for a financial year, with the last dip into negative territory the result of the global financial crisis (GFC).

Though past performance is not a guarantee of future performance, history tells us that markets will recover over the long-term, as they did following the GFC.

This is visible in the following chart, which shows the one-year returns for our Growth option over the last 11 years.

While it may be tempting to invest in an option like Cash when the market is down, it’s important to remember that, not only are interest rates currently at an all-time low, but changing your investment strategy for even a short period can have a significant impact on your long-term outcomes.

We recommend you seek expert financial advice before making decisions about your investment options.

How your investment options are performing against their objectives

As at 30 June 2020 – all returns and objectives are per annum and after investment fees.

Investment Option Return objectiveActual returnReturn objectiveDifference
Glidepath: Take-OffCPI + 5% over 10 years 5.8% 6.1%-0.3%
Glidepath: AltitudeCPI + 4% over 7 years 5.3% 5.1%+0.2%
Glidepath: CruisingCPI + 3.5% over 6 years 5.1%4.6%+0.5%
Glidepath: DestinationCPI + 3% over 5 years 4.5% 4.1% +0.4%
AggressiveCPI + 5% over 10 years 7.9% 6.5% +1.4%
GrowthCPI + 4% over 7 years 6.6% 5.5% +1.1%
BalancedCPI + 3% over 5 years 4.4%4.3% +0.1%
ConservativeCPI + 2% over 3 years 3.9%3.1% +0.8%
CashBank Bill Index over 1 year 1.2%0.7% +0.49%

As Glidepath was established on 1 October 2015, only three year returns are shown for these options.

All but one of our investment options are meeting their long term objectives. Once again, this highlights the importance of focusing on investing your super for the long term.

What's behind the numbers?

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

Government extends income support measures

According to Chris, a range of support measures from the Government and other institutions have helped buoy the Australian market over the last few months.

“The huge amount of stimulus we’ve seen in terms of JobKeeper and JobSeeker, and measures like banks allowing customers to defer their mortgage payments, have all been incredibly helpful,” Chris said.

Recognising this, the Government announced an extension to its stimulus measures in July 2020. JobKeeper has been modified and extended by six months to 28 March 2021, while the extra Coronavirus Supplement for Australians on income support payments such as JobSeeker has been extended to the end of December 2020.

The payments will be reduced, or tapered, through the extension period, with the Government stating this will support a gradual transition to economic recovery.

Philip Lowe, Governor of the Reserve Bank of Australia (RBA), stated on 4 August 2020 that the extension of the stimulus package is a “welcome development”, as support is expected to be necessary for some time.

Similarly, Lowe said the RBA is committed to doing what it can to support jobs, incomes and businesses in Australia.

“Its actions are keeping funding costs low and assisting with the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required.”

With this in mind, the Board of the RBA chose to leave the cash rate on hold at 0.25% at its August meeting.

However, there was some optimism from Lowe.

“The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia,” he said.

Countries continue to open up after lockdown

Markets will also continue to keep an eye on how countries around the world fare as they ease restrictions and start to take steps back towards normalcy.

Countries around Europe, for example, are welcoming each other’s tourists, while some have also opened up their borders to travellers from countries deemed to be relatively low-risk, such as Australia.

While each step is a positive for the market, Chris said the most important will, of course, be a vaccine.

“The potential for a vaccine is a really big positive. If there is a successful vaccine and it can be mass-produced, that will be a big step in helping to get things back on track,” he said.

According to The Guardian, the World Health Organisation (WHO) is currently tracking the progress of over 180 candidate vaccines. While the majority are still in the pre-clinical stage, 25 have progressed to Phase 1 of testing as of 4 August 2020, with small-scale safety trials underway.

A further 17 potential vaccines are in Phase 2, while 7 are currently in Phase 3, undergoing large-scale efficacy trials. This is the last testing phase before a vaccine can be approved.

The lead up to the US election

With the US Presidential election now just a few short months away, Chris said the market will also be keeping a close eye on any announcements from the candidates around policy, and how they influence opinion polls.

Given markets don’t tend to like uncertainty, a run of steady opinion polls over the coming months will help shore up investor sentiment.

Analysis from JP Morgan found there are three key areas of focus around the election that will have an impact on markets.

Perhaps the most important will be each candidate’s roadmap to recovery for the economy in 2021, while the management of the US-China relationship will also be key. Following the agreement of Phase 1 of a long-debated trade deal earlier this year, tensions between the two countries have risen once more as a result of the COVID-19 pandemic.

Analysts also have their eye on progressive policy proposals from the Democratic nominee Joe Biden on issues such as corporate tax changes and the American healthcare system.

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