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Following a strong start to 2020, Qantas Super’s investment options experienced volatility over the March quarter as a result of countries around the world enforcing lockdowns to contain the spread of COVID‑19.

While falls in share markets globally dominated the headlines, Qantas Super investment manager Chris Grogan said a range of so-called “safe haven” assets, such as government bonds and high quality credit investments, performed well.

This result underscores the importance of building well diversified portfolios with investments that complement one another. Qantas Super’s investment options (excluding the Cash option) 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 these 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.

How your investment options are performing

As at 31 March 2020 – all returns and objectives are per annum and after investment fees.

Investment optionReturn objectiveActual returnReturn objectiveDifference
Glidepath: Take-offCPI +5% p.a. over 10 years4.1% (3 year p.a. return)6.7%-2.6%
Glidepath: AltitudeCPI +4% p.a. over 7 years3.9% (3 year p.a. return)5.8%-1.9%
Glidepath: CruisingCPI +3.5% p.a. over 6 years3.9% (3 year p.a. return)5.3%-1.4%
Glidepath: DestinationCPI +3% p.a. over 5 years3.7% (3 year p.a. return)4.8%-1.1%
AggressiveCPI +5% p.a. over 10 years6.5% (10 year p.a. return)6.7%-0.2%
GrowthCPI +4% p.a. over 7 years5.9% (7 year p.a. return)5.8%+0.1%
BalancedCPI +3% p.a. over 5 years3.4% (5 year p.a. return)4.8%-1.4%
ConservativeCPI +2% p.a. over 3 years3.4% (3 year p.a. return)3.8%-0.4%
CashBloomberg AusBond Bank Bill over 1 year1.5% (1 year p.a. return)1.2%+0.3%

As Glidepath was established on 1 October 2015, only three year returns are shown for these options. Past performance is not a guarantee of future performance.

While the volatility in financial markets over the last quarter has seen most of our investment options fall behind their long-term return objectives, it’s important to remember that they are just that: long-term objectives.

Each option is designed to deliver on its objectives over a particular period of time, and because volatility is a normal part of investing for the long term, negative returns are expected from time to time.

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:

How to digest the market's daily movements

For many, our main exposure to finance news and how the market is performing comes via a five minute update on the nightly news.

The nature of the daily news cycle means the market’s movements will be discussed in a day-to-day context, but it’s important to remember that most people’s superannuation accounts will be invested for multiple years – in many cases for decades.

For example, the chart above looks at the daily performance of the Australian Securities Exchange’s All Ordinaries index over the month of April 2020. It generally hovered between the 5,200 and 5,400 level, jumping up and down and back up again every few days as the market reacted to different pieces of local and global news.

This kind of market volatility can be unsettling to experience, but it’s a normal part of the share market processing new information in an uncertain environment. So while it may be unsettling to see your balance change materially from one week to the next, at times like this it’s important to keep your focus on the long-term.

The chart below displays the performance of the All Ordinaries index from 2010 to 2020.

While there were short-term dips over the decade, we can see that the overall long-term trend was one of growth.

Economic stimulus from the government and RBA

The economic stimulus packages announced by the Australian government, which so far amount to almost 10 per cent of Australia’s gross domestic product (GDP), have helped steady the economy and therefore the market’s outlook.

The Australian government also retained its AAA credit rating from global credit rating agency Moody’s in April 2020, helping maintain a level of confidence in the local economy.

“If we hadn’t kept that triple A rating, it may have meant the government would have to pay more to borrow, and that Australian banks would have to pay more to get funding both in Australia and offshore,” Chris explained.

“That would have an impact on the economic outlook, because the increased costs for banks would likely flow through to mortgage costs. The Australian dollar might also fall in that environment.”

The Reserve Bank of Australia (RBA) has taken a number of actions to steady the economy.

The RBA announced a funding facility of at least $90 billion for the banking system, which will essentially allow banks to borrow money and lend it to businesses. This measure aims to help keep businesses afloat and growing, with small-to-medium sized businesses a particular focus.

The RBA also announced two rate cuts in March, taking the cash rate to a record low 0.25 per cent, but chose to leave it on hold in April and May 2020.

Philip Lowe, Governor of the RBA, stated on 5 May that if infection rates continue to drop, a recovery in the global economy may start later this year.

“Globally, financial markets are working more effectively than they were a month ago, although conditions have not completely normalised,” he said.

“This improvement reflects both the decline in infection rates and the substantial measures undertaken by central banks and fiscal authorities.”

Re-opening the local economy as the virus is contained

The market is keeping a cautiously optimistic eye on movements in countries like Australia and New Zealand, where the virus seems to have been largely contained and restrictions are being eased.

While life won’t return to normal for a while yet, Chris said each step we take that helps us get back to what life looked like pre COVID-19 is a positive for the market.

“The chance that domestic travel in particular starts up again soon could be a real positive not only for our members, but also in terms of getting the Australian economy going again too,” Chris said.

“I don’t think the world is going to fundamentally change forever. The value of quality assets will bounce back. There’s a lot of fear out there at the moment, which creates opportunities for courageous investors to buy quality assets at better prices,” Chris said.

“Once the pandemic is over, we’ll still have consumers who want to consume – people will want to go to restaurants, be entertained, and travel.”

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