Investment insights

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

Markets were buoyed throughout the March 2024 quarter by the expectation of interest rate cuts from the US Federal Reserve, with other central banks around the world also expected to follow suit. This resulted in strong performance in listed equities, with the Australian benchmark S&P/ASX 200 reaching a new record high of 7,910.7 points on 2 April 2024.

“Cutting interest rates is good for business and for lenders, and the stock market gets excited about that,” Chris said.

While the market may have been pricing in rate cuts, Chris explained that a strong earnings season also spurred growth: for example, tech company Nvidia, one of the so-called ‘magnificent seven’ tech stocks in the US, reported in February revenue growth of 265 percent over the 12 months to 31 December 2023.

However, growth slowed significantly through April 2024 as inflation in the US has remained higher than the market anticipated, leading investors to cut back their expectations of interest rate cuts.

Closer to home, the Board of the Reserve Bank of Australia (RBA) chose to keep rates on hold at its meeting on 7 May 2024, explaining in a statement that while inflation continues to “moderate”, it is declining more slowly than previously anticipated.

“The economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth.”

In turn, the RBA stated that it is “not ruling anything in or out” when it comes to interest rates and will “rely upon the data and the evolving assessment of risks”.

In 2021, Qantas Super announced our ambition of achieving net zero carbon emissions across our investment portfolio by 2050. We are continually looking at the best ways to reach our ambition and we may occasionally make changes to ensure we are on the right track.

We recently announced a couple of changes and provided an update on the work we’ve done so far.

As part of this work, we have made a number of private markets investments that support the broader economic transition to net zero, including renewable energy and electrification solutions, e-waste recycling for green metals extraction, and sustainable and regenerative agriculture.

Among these investments is goFARM, with Qantas Super committing $200 million to the fund, which will look to transform underutilised agricultural land into horticultural projects. $150 million has already been allocated to two goFARM assets, Riverina Trust and Sandmount Farms. More than 5,000 hectares of land with substantial water holdings will be converted into high yielding, water efficient horticultural crops.

Looking at the broader environmental, social, and governance (ESG) space, Qantas Super also recently committed $75 million to impact investment manager For Purpose Investment Partners.

For Purpose owns a not-for-profit aged care platform, FP Aged Care Australia. The investment helped fund the acquisition of 15 aged care facilities, taking its total owned to 19, including development sites.

This quarter marked another anniversary of the onset of the pandemic. It’s been a particularly interesting four years for global markets since, with the downturn through 2020 followed by record high returns for Qantas Super in 2021, before we saw more ‘normal’ numbers come through from 2022.

As Chris often tells us, if there’s one thing markets dislike, it’s uncertainty, and there was a lot of uncertainty experienced at the start of the pandemic, which led to significant volatility across global markets.

In turn, this led members of super funds across the country to switch to investment options with a lower degree of risk. But as we regularly say here at Qantas Super, super is a long-term investment, so while it can be unsettling to see your balance going up and down, it’s important to look beyond any short-term volatility.

Let’s look at how the last four years could have played out for two members.

A Qantas Super member who moved their balance of $100,000 from our Growth option to our Cash option on 1 April 2020 and did not move it back would have seen their balance grow to $107,810.48* over the four years to 31 March 2024.

Meanwhile, a member who kept their balance in Growth through this same period without switching would have seen their balance grow to $153,096.66* to 31 March 2024.

This is a total difference of $45,286.18*, based on a starting balance of $100,000 and assuming these accounts did not receive any further contributions or deductions (i.e fees). This difference may have been larger if these accounts had been receiving contributions through this time due to the effects of compound interest.

Of course, what if someone had switched options again over that time? The reality is that it’s difficult to ‘time the market’, and by changing to a lower risk option in a downturn, you risk crystallising your loss by selling out at a time when prices are low.

Think of it in terms of buying and selling a house: if you bought a house for $1 million, and then house prices dropped and your home was valued at $750,000, you would only make a loss if you actually decided to sell it at this point in time.