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:

It’s been a busy few months for US markets, with investors reacting to its first rate cut of the year in September 2024 and Donald Trump winning the Presidential election in November 2024.

The US Federal Reserve reduced the cash rate by 0.50% in September 2024 and by a further 0.25% in November 2024, bringing the US cash rate to the lowest it’s been since March 2023.

As Chris explained, a lower cash rate means a lower cost of borrowing – which markets like.

Meanwhile, Trump winning the election has led market commentators to consider what effect his various policies will have on the economy.

As Chris explained, Trump’s promised tax cuts may have an effect on interest rates: as the government will earn less income while it continues to spend, it will need to issue more debt to pay for its budget deficit.

“If you take the government as a company, if the government’s revenue is falling, for example through lower taxes, and their expenses are going up, as an investor you would want a higher return for that,” Chris explained.

“The US’s budget deficit is likely to be higher than US gross domestic product [GDP] growth, meaning that total US debt to GDP is growing. Long term this is not sustainable, and something will need to give. Interest rates, at the long end, could push up higher, which then flows on to corporates and borrowing capacity.”

Economists have also discussed the potential effects of Trump’s proposed tariffs. Trump announced in late November that he would sign an executive order upon his return to office implementing tariffs of 25 percent on Canada and Mexico, and a separate tariff on all imports from China. Canada’s largest export to the US is oil, while Mexico exports various products including electronics and appliances.

The effect of the tariffs on US consumers will depend on whether a foreign exporter would absorb the cost by lowering their prices, or choose to pass it on by increasing prices by the cost of the tariff. If they pass it on, a US firm importing goods would face a similar choice of whether to absorb the cost themselves, or pass it on to the consumer by increasing prices.

With work well underway on implementing the merge with Australian Retirement Trust, Chris has been reflecting on the journey Qantas Super has been on and the evolution of the fund’s investment strategy over the last decade or so.

Joining the fund in 2012, Chris was one of the first members of Chief Investment Officer (CIO) Andrew Spence’s Investments team.

At the time, Qantas Super was focused on bringing the defined benefit asset pool back into positive territory following the global financial crisis. A key response was the implementation of the Journey Management Plan, which set out the funding of the defined benefit investment portfolio, and the de-risking of the defined benefit portfolio as the defined benefit funding position improves over time.

Over his time at Qantas Super, Chris also played a role in the development of Glidepath, our MySuper lifecycle strategy.

According to Chris, the results delivered by the Investment team have been possible thanks to the mature governance structure Qantas Super has in place, where the Investment Committee has delegated certain decisions to the CIO.

“I think that has differentiated Qantas Super from other funds. The delegations from the Investment Committee to Andrew, covers the investment activities that enable the Investment team to manage day-to-day activities effectively,” Chris explained.

“It means that after undertaking investment research and seeking Andrew’s delegated approval about something happening in my area of the portfolio, we can make a decision and implement it quickly, which can help deliver better outcomes for members.”

Andrew spoke about the evolution of Qantas Super’s investment program at our 2023/24 Annual Member Meeting. You can catch up on the event by watching below, or listening to the session in podcast form: