As financial markets across the world continue to be impacted by the coronavirus health emergency, QSuper is one organisation sticking to its long-term investment strategy and diversification approach to ride the market jitters and seek new asset opportunities that these market conditions may present.
The investment strategy employed by QSuper is to invest in a “risk-balanced” way, focusing on risk allocation not asset allocation. This diversification approach is different to that taken by most other superannuation providers.
The strategy came about as a result of members’ feedback of their experience during the 2008 global financial crisis and was designed to give members a smoother ride and weather ups and downs during times of market volatility.
It is an approach that earned QSuper the inaugural 2020 Smooth Ride award from research agency SuperRatings (footnote 1) for giving members a smooth financial ride during a time of market volatility while also delivering members strong outcomes over the long term.
And more recently, QSuper’s Balanced investment option has led the industry in investment performance over the past three months of extreme volatility and is an industry leader over 1, 3, 5 and 10 years, according to SuperRatings. (footnote 2)
What does the smooth strategy look like?
What the investment strategy means is that in QSuper’s default investment option, and most other diversified options, there is decreased equity risk and increased exposure to other asset classes.
These other asset classes are led by bonds, which tend to go up and down at opposite times to shares. It also includes direct infrastructure, real estate, private equity and alternative investments.
During the market volatility experienced around the response to the coronavirus pandemic, some asset prices, notably listed equities, fell across global markets. As a result, the portfolios of many investors with holdings in shares were impacted, requiring them to support the portfolio with cash injections.
During the same period, some assets have risen strongly in value. For example, QSuper’s portfolio of high-quality sovereign bonds generated solid profits as bond yields fell in anticipation of policy makers stepping in and lowering interest rates in an effort to stimulate the economy.
QSuper is also a large holder of cash, which positions it to take advantage of investment opportunities within the market and is designed to allow diversification.
The fund, with more than $113 billion in funds under administration(footnote 3) , has more than 20% of its assets in either cash or cash equivalents.
QSuper Chief Investment Officer Charles Woodhouse said that amount of liquidity had actually gone up since the start of the crisis.
“QSuper is a very liquid fund and that is absolutely by design,” Mr Woodhouse said.
“We are sticking with our strategy of being as diversified as possible so that we can create a smoother ride if we do encounter some additional volatility.”
Managing members’ money in a volatile market
Mr Woodhouse said market volatility was not new. During the past 10 years, natural disasters such as the tsunami in Japan, political events such as Brexit, market swings during 2018 and now a global health event all impacted markets.
“QSuper’s investment team manages their portfolios, our members’ money, with the potential for this sort of negative event in mind,” he said.
“Most other super funds choose investments based on asset diversity, a certain mix of shares, property, fixed interest and so forth.
“At QSuper, we pursue risk diversity. What that means for our members in our diversified options is less exposure to share market risk and more exposure to other asset classes.”
To find out more about QSuper’s award-winning investment strategy visit qsuper.qld.gov.au