Investment Update – Coronavirus and super

Investments
16th March 2020
COVID-19 is continuing to impact investment markets and the global economy. Here’s the latest update on what’s been happening and how CareSuper is responding.

What’s been happening in investment markets

We’ve seen substantial declines in share markets around the world in just a few weeks as investors try to anticipate how severe the impact of the coronavirus will be on the economy worldwide.

The share market moves have been large and rapid, due to the high level of uncertainty surrounding the COVID-19 virus. The key issue for financial markets is the spread of the virus and the impact this has on the global economy due to businesses closing, restrictions on travel and declining trade. The virus has been found in over a hundred countries, and it’s still not clear when or how it will be contained. It’s unclear how long it will take for normal business to resume and how significant the reduction in company profitability will be.

Policy makers around the world are taking action to support economies and markets by reducing interest rates and injecting liquidity into the financial system. We are also seeing the announcement of very large government spending packages, aimed at supporting businesses and the continued employment of workforces. Further action by governments is expected, including measures aimed at reassuring investors as well as communities.

These actions have meant that investors have witnessed days of rises (as well as declines) in share markets.

For now, uncertainty remains high and further volatility can be expected. While we know that share market ups and downs are a normal part of investing, it’s been over 10 years since the last downturn of this magnitude. As a result, many investors will be concerned.

In times such as these it’s all the more important to remember that investing for the future can require patience and a long-term view. For the vast majority of members, their super will continue to be invested for many cycles into the future.

What CareSuper is doing

At CareSuper, we continue to monitor portfolios and markets closely, taking action when appropriate.  Our approach remains focused on controlling risk as well as taking advantage of opportunity.  Actions we are taking include:

  • The strength of diversification - We’ve designed our diversified options to include other investments such as direct property (e.g. office buildings), infrastructure (e.g. ports, toll roads etc.), and other alternatives not listed on the share market. These are a mix of growth and defensive assets which ensure there are a variety of sources of return in the portfolio, particularly sources that are not dependent on share markets.
  • Lower allocations to shares – Prior to the COVID-19 pandemic we had adopted a cautious approach to share investments.  This means that in each of our diversified options the allocation to shares was lower than compared with recent years and lower than the benchmark allocation in each diversified option.   
  • Higher levels of cash - We also had material cash balances prior to share market declines. Holding cash means we have funds available to purchase shares or other assets at attractive prices as markets fall. In this way our members can benefit when markets start to rise again.
  • Adhering to our investment approach – In volatile times it’s even more important to stick to our investment strategy and approach to managing portfolios. Our approach has been applied through many market cycles and past downturns, and has been key to CareSuper’s track record of outperformance.*

Members should be assured that we’re closely monitoring markets, economies and the actions of governments in order to ensure that we are able to respond in a way that helps to maximise your savings and manage risk.

What you can do

An important thing you can do is to make sure that your investments reflect your long-term investment objectives. History has shown that having a robust and appropriate long-term plan and sticking to it gives you the best chance of reaching your retirement goals.
If you’re still worried, we have information available for you to consider. Try to:

Still need help? Speak to one of our financial planners^  or contact us online or giving us a call on 1300 360 149.

*Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments.