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:

While super investments can seem ‘set and forget’ on the surface, our Investment team is always looking at how to best structure the portfolio, so it’s optimised to deliver for members in potential environments.

Crucial to the ability to make certain moves are our asset allocation ranges for each investment option. These indicate the proportion of an investment option’s assets that can be allocated to each asset class; the actual allocation to each asset class may vary from time to time, within the ranges indicated, as the team makes moves.

These ranges were adjusted in early 2020, with this change giving the Investment team greater flexibility to maintain and, if appropriate, invest further in specific asset classes.

“We’re always thinking about our asset allocation exposures and how our portfolios are constructed to ensure that we’re appropriately constructed in the current environment, and more importantly for potential future investment conditions. We are always looking at where the opportunities and challenges lie,” Chris said.

The team may increase or decrease exposure to a particular asset class or adjust how portfolios are constructed if they feel that doing so may help Qantas Super meet (or exceed) investment return objectives for our members.

The ability to adjust is important: while it may not seem so positive, Chris said that this type of market can bring a range of new opportunities.

“At this time, we can start looking to reduce our exposure to certain assets so that we’re ready to buy other attractive investments at a good price,” he explained.

The team will also be looking at the structure of Qantas Super’s fixed interest portfolio, which has been performing well relative to the market.

“Bonds typically tend to pay off in times of slower growth, because investors all go to safe haven assets, like US Treasuries,” Chris explained. “When people pile their money into safe havens, you then see these assets perform.”

With Australia’s inflation rate reaching a 30-year high in October 2022 and the Reserve Bank of Australia (RBA) raising the cash rate in response, all eyes are on how consumers will respond, particularly in the lead up to Christmas.

Dr Philip Lowe, Governor of the RBA Board, stated in November 2022 that while higher interest rates and inflation are putting pressure on household budgets, the unemployment rate is low and the saving rate higher than it was before the pandemic began.

“[Raising rates] has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target. The Board expects to increase interest rates further over the period ahead,” Lowe explained.

“It is closely monitoring the global economy, household spending and wage and price-setting behaviour. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”

The RBA’s inflation target range is 2-3 per cent. According to the RBA, this target range is “sufficiently low that inflation at this level does not significantly influence people’s economic decisions”.

According to the RBA, along with reducing consumer purchasing power, inflation being too high can also lead to diminished returns for investors, higher wage growth that may lead businesses to raise prices or reduce their workforce, and reduced competitiveness for a country in the global economy.

On the other hand, if inflation is too low this may also have a number of negative effects. For example, consumers may delay purchases because they expect prices to fall. Falling prices – a situation also known as ‘deflation’ – can then lead to lower spending, which may then lead businesses to reduce wages or let workers go, meaning further downward pressure on demand and prices.