Investment insights

Want to know the stories behind the numbers? We had Chris Grogan, Head of Defensive Assets and Deputy CIO at Qantas Super, talk us through the latest market activity and what’s on the horizon:

Strong performance over 2022/23 was spearheaded by listed equity markets, both at home and abroad, with tech companies leading the charge.

As Chris explained, the so-called “Magnificent Seven” tech stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – helped the US market rally this year, which contributed to a strong result for Qantas Super’s listed equities portfolio.

Equities also helped deliver a significant turnaround for our newest investment option, Thrifty: which declined -5.4% in 2021/22, Thrifty sprang back up to return 11.2% over 2022/23.

“Thrifty has an allocation of 72.5% to listed equities. This is invested via the tracking of multiple indices, which means it got the combination of the global and Australian markets,” Chris explained. Thrifty also has a 5% allocation to cash, allowing it to benefit from the raft of interest rate rises over the last year. The remaining allocation is in Australian Government Bonds, which returned 0.9% over the year.

The contribution of the listed equities portfolio to our investment returns this financial year highlights the importance of diversification: Qantas Super does not just invest in the share market; rather, we have invested across over 5,000 investments, which in addition to shares, also includes property, infrastructure, agriculture, a variety of bonds, and cash.

Having your super spread across these different types of investments is designed to help smooth the ups and downs that may be experienced by any one category of investment and allow your super to keep performing in the long-term.

For example, where our private equity portfolio helped power Qantas Super through 2020/21 and 2021/22, it saw more modest returns (+5.9%) over 2022/23. Meanwhile, our listed equities portfolio, which had seen modest returns over 2021/22, saw more growth over the past financial year.

The rising cost of living has been likely been front of mind for many, with inflation leading Australians to re-evaluate their spending.

Our expert Qantas Super Investment team keeps a close eye on inflation in a variety of ways, with one of these being through our CPI+ objectives. CPI, or the consumer price index, measures the average change over time in the prices paid by households for a basket of goods and services.

We measure our returns against CPI because, as super is a long-term investment, it’s important to ensure that the dollars you invest today will be able to support you decades down the line in your retirement, when the prices of the goods and services you buy are likely to have risen materially from where they are now.

With CPI rising significantly over the last year, a few of our investment options did not meet their CPI+ return objectives as at the 30 June 2023, as was the case for most superannuation funds.

As these options have an investment time horizon of five years or less, Chris explained that the sharp rise in CPI over the last year meant the impact was more significant for these options with a shorter time horizon. Our options with a longer time horizon, on the other hand, continued to exceed their stated objectives.

However, Chris said there’s no need to be concerned. As CPI measures the rate of change over time, he said the results will shift as inflation slows down around the world.

Two years ago, Qantas Super embarked on its goal to achieve net zero carbon emissions across our investment portfolios by 2050, with Phase 1 to be completed by 30 June 2025. Qantas Super made this commitment because we believe that environmental, social, and governance (ESG) factors impact investment returns and risks, and contribute to us delivering sustainable growth to our members.

In particular, we believe that climate change adaptation will drive significant investment to decarbonise existing businesses, and drive the creation of new businesses that don’t exist today. These changes represent opportunities to generate great returns for members. At the same time, there are investment risks if action is not taken to understand and manage climate change issues.

After making significant inroads in year one, year two also proved to be a big one in this space, with the team making a number of investments in areas that focus on this theme.

Among these is RFC Ambrian, one of our newest investment managers. A well-established adviser focused on the natural resources, energy, and heavy industrial sectors, Qantas Super will be working closely with RFC Ambrian on making early-stage investments to emerging decarbonisation technologies and critical minerals.

Qantas Super has also invested in pumped hydro energy storage and vanadium redox flow batteries, two technologies that focus on renewable energy storage.