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Market update for Q1 FY2018

09 November 2017

Qantas Super delivered positive performance in the first three months of the 2018 financial year. Here’s what happened in the quarter across global markets, and what it means for your super.

China

China has continued to surprise observers with its economic strength, improving the prospects for a transition to sustainable growth under the leadership of President Xi Jinping.

Government infrastructure spending is fuelling a construction boom, while manufacturing activity grew at its fastest pace since 2012. June quarter GDP data showed economic growth holding steady at 6.9% a year, with the OECD forecasting it would remain around 6.8% for the rest of 2017.

Europe

The European economy continues to gain momentum despite ongoing uncertainty over the Brexit process. The European Central Bank left rates on hold this quarter, while upwardly revising its 2017 growth forecast to 2.2%. Unemployment is down, with six million new jobs created since the economic crisis, while manufacturing is at its highest level since 2011.

US

Good economic news helped drive the US share market to record highs as unemployment fell – and despite the effects of hurricanes Harvey and Irma.

The US Federal Reserve left the cash rate unchanged and confirmed that it was ready to start unwinding the quantitative easing program that was put in place after the global financial crisis – providing another vote of confidence in the US economy.

Australia

Back home, the Australian share market had a lacklustre quarter, as commodity prices fluctuated and the utilities sector came under pressure. This was despite strong jobs growth which added 81,900 new jobs in July and August, and a largely positive reporting season that saw total profits for Australia’s top 200 companies rise 63%.

Meanwhile, the Australian economy continued to pick up pace, with GDP expanding by 0.8% in the June quarter, for an annual growth rate of 1.8%.

How your investments performed

All Qantas Super investment options delivered positive performance over the September quarter.

Highlights

  • Global equities drove performance, with the MSCI ACWI ex Australia Index (unhedged) investment option returning 2.87% for the quarter and 15.85% over the year
  • Investments in Real Assets (property, infrastructure, agriculture and timber) showed strong returns, with 1.44% growth over the quarter, and 8.82% over the year
  • The Growth investment option achieved a return of 1.35% for the quarter, and 8.38% over the year
  • Defensive fixed interest investments delivered a positive return of 0.62% for the quarter, against the backdrop of declining Australian Bond benchmarks and the potential for rising interest rates in the US

What does it mean for your super?

Overall, the news is good for your super, despite short-term ups and downs. Remember, markets may rise and fall from day to day, but your super is an investment for life.

Our investment philosophy ensures that we’re focused on the long term, which means choosing high quality, value for money investments that can weather market fluctuations to deliver results. Risks and rewards are taken into account, so we can help your super contributions grow. It’s all part of working with you to help you meet your retirement goals.

 

How we’ve performed against our objectives

Most of our investment options continued to perform consistently against objectives. In particular, Growth and Balanced outperformed their objectives at +1.19% p.a. and +1.74% p.a. respectively. For the September quarter, all options provided returns slightly under their CPI+ hurdles, which will occur at times over a short timeframe like three months.

Highlights

  • CPI rose 0.63% over the September 2017 quarter, and 1.83% over the year ending the same period
  • Qantas Super’s investment options have long term return objectives linked to inflation, plus an additional hurdle appropriate for each option
  • For the three months ending September 2017, all investment options provided returns marginally lower than their CPI+ hurdles. Over a short time period, this will occur from time-to-time
  • For the year ending September 2017, all investment options outperformed their CPI+ hurdles. For example, the Growth option provided a return of 8.38% over the year, outperforming its CPI + 4% objective by 2.55%
  • Against stated objectives, most investment options have provided consistent performance:
    • Conservative option has provided a return in-line (0.01% p.a. below) its CPI + 2% objective over a 3-year timeframe
    • Balanced option has outperformed (+1.74% p.a.) its CPI + 3% objective over a 5-year timeframe
    • Growth option has outperformed (+1.19% p.a.) its CPI + 4% objective over a 7-year timeframe
    • Aggressive option has underperformed (2.59% p.a. below) its CPI + 5% objective over a 10-year timeframe. This under-performance is due to the 10-year time frame which has been negatively impacted by the Global Financial Crisis. The Aggressive option has, however, provided strong outperformance over its stated objective over 1, 3, 5 and 7 year periods

Call us today

If you have any questions, call us on the Qantas Super Helpline on 1300 362 967.

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