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Quarterly Investment Update

Welcome to our investment performance update ending 31 March 2020.

The unprecedented global pandemic that has swept around the globe has plunged the world into hibernation, dramatically affecting our way of life. Club Plus Super Chief Investment Officer, Gemma Dooley, looks at how this has affected financial markets and your super.

Gemma says that sharemarkets have, “felt the full brunt of the global lockdown and have fallen dramatically since setting record highs in late February this year, with most markets initially falling around 35%”.

Fiscal measures introduced

Since then governments and central banks around the world have stepped in to help economies weather this storm.

The Australian Government has announced initial fiscal stimulus packages of around $200 billion (nearly double that required during the GFC) and increased this further to $320 billion, while the US has pledged a stimulus package worth $US2 trillion.

In addition, central banks have introduced measures, including reducing interest rates, to make it easier for borrowers (households and businesses) to service their loans during these difficult times.

“These measures are unlikely to stop a marked contraction in the economy, but should ease the financial impacts of the outbreak on businesses and households and provide a material boost to economic growth when the threat from COVID-19 abates,” explains Gemma.

She goes onto add, “they have also provided some hope for sharemarkets, with most clawing back some of the early losses for the time being.”

It’s not all bad news

The Australian sharemarket finished the month of March down 21% with other global sharemarkets suffering similar losses. As a result, Club Plus Super investments with an asset allocation to shares have posted negative returns for March. The MySuper option, which most members are invested in, was down 8.9%. Over the last year this option has now returned -3.3%.

Diversification chart

Gemma says that as troubling as this is for members it is clear from this result that diversification has helped to cushion the blow. This will significantly help returns over the long term:

“The more any drawdown can be minimised, the quicker it will be for a member’s balance to recover from the loss on paper.”

While some Club Plus Super investments have suffered losses, such as infrastructure assets like airports and toll roads (due to the lockdown) because travel by road and air has been massively restricted, others have shown some resilience and generated strong returns for members. These include energy services (electricity, gas distribution and windfarms) and essential services such as water treatment plants.

The supply of energy in particular has not been affected by the downturn in the economy. In fact, demand has increased due to the many people working from home during this period who are drawing on these services.

Similarly in our property portfolio, retail property assets, such as shopping centres, have really suffered because shopping for anything other than groceries is considered a ‘non-essential activity’ and therefore many retailers have closed down, at least temporarily. However, assets in the industrial property sector, such as distribution and logistics centres, are thriving as we all scramble to order anything and everything online.

Super is a long-term investment

To put super into a long-term perspective, despite the negative returns for March, the latest 10-year return for the MySuper option is still 6.3% per annum which is higher than its objective over that period.

10-year returns

Despite all sorts of market volatility over the 15 year history of this investment option there is not one 10-year period that has delivered a negative return.

negative returns graph

What’s next?

No one really knows how long the pandemic will take to get under control around the world and therefore how long the global shutdown will last. This high level of uncertainty means market volatility is likely to remain elevated and it is impossible to know when markets will recover.

Gemma says history shows that markets have recovered from similar dire events in the past:

 “We all thought the GFC was disastrous at the time but only two years later global markets had reached their previous highs.”

History shows markets recover

Your super is in good hands

Club Plus Super assures members that we are actively managing your superannuation investment, drawing on some of the world’s best investment managers and an experienced asset consultant. Gemma says, “we use over 20 specialist, different yet complementary, investment managers to manage our members’ money”.

Club Plus Super is closely following global developments and making investment decisions based on strong research and a very disciplined investment process.

In the meantime, Gemma is hopeful that the spread of COVID-19 can be halted and a vaccine developed as soon as possible, “so that life can return to normal for all of us”.

More information

If you have any questions about your investments or your superannuation, please call Club Plus Super’s contact centre on 1800 680 627.

Important information about investment returns:

Past performance is not a reliable indicator of future performance. Unless otherwise stated, returns are net of investment fees and taxes, except in the case of Club Plus Pension options, which are untaxed. The earnings applied to members’ accounts may differ. Investment returns are at the investment option level and are reflected in the unit prices for those options. Prior to 20 March 2017 annualised returns represented the annual crediting rates that were determined in August each year. Daily unit prices are available at Figures quoted were correct at the date of filming, 17 April 2020.