What is happening in the market?
In the past few weeks, share markets around the world have experienced a sharp sell-off. Closer to home, the Australian share market has fallen; however, it isn’t time to make hurried decisions about your finances.
The main reason for these falls is a growing concern about the infection rate of COVID-19, paired with the recent crash in oil prices and the impact these factors might have on economic growth and company profits. It is possible that COVID-19 news headlines are triggering sales on long-held positions in technology and other stocks, also impacting the market. These behaviours may settle once we know the long-term outcome of Coronavirus.
How is this affecting my superannuation?
Whilst some LGIAsuper members have chosen to invest in more aggressive or conservative investment options, most members are invested in the Fund’s default MySuper LifeCycle option. Whilst this option does have exposure to international and Australian shares, it currently has approximately 50% of funds allocated to other asset classes which limits the impacts of share market volatility.
What is LGIAsuper doing to protect my investments?
In the lead up to the current crisis, LGIAsuper undertook a number of actions to protect members’ investments during this volatile period. These included:
- reducing LGIAsuper’s overall exposure to shares.
- holding more overseas currency than usual – the Australian Dollar’s fall in the last few weeks against other currencies has reduced the impact of losses from international shares.
- holding government bonds in the diversified investment options (like Diversified Growth and the MySuper options). These bonds have gone up in value as interest rates have fallen, which has offset some of the share portfolio losses.
- holding investments in good-quality unlisted property and infrastructure assets, which are maintaining their value – these tend to generate stable earnings over a long term, helping to reduce portfolio volatility.
- continuing to hold alternative investment strategies which are outperforming share markets.
As the situation evolved into a pandemic, LGIAsuper took further steps to support member returns, including:
- selling some of our government bonds as they rose in price, often significantly.
- increasing allocation to Australian shares and reducing our exposure to international shares.
- reducing LGIAsuper’s emerging markets allocation within international shares.
- rebalancing the portfolio to capitalise on the market volatility and add incremental returns to the portfolio – buying shares at low prices after they have fallen, and selling them at high prices.
- ensuring that, as our international exposures fell with international share markets, we also sold off some of our currency hedging.
- increasing the amount of cash we are holding across our portfolio.
Our focus on delivering good returns regardless of market conditions is paying off, with our default LGIAsuper - MySuper Lifecycle Under 75 investment option recently ranked the number one MySuper Option in the market this financial year to end of February 2020 in the latest SuperRatings FCRS February 2020 survey results. Our LGIAsuper Diversified Growth investment option was also ranked number two in the Diversified Growth category.
Looking long-term, LGIAsuper will continue to run a diversified investment program, spreading members’ money across a range of share market, property, infrastructure, debt and other growth assets. These growth strategies are then combined with allocations to government bonds, cash, and investment grade corporate debt to generate an appropriate overall mix of returns, and to help protect investments during times of market distress.
What should members do now?
It is important to avoid making snap decisions driven by media headlines. Superannuation is a long-term investment for most members, so keeping your investment timeline in mind is crucial when the market is turbulent.
We know some members will be looking at their options and we respect your right to control your own investment strategy. However, we strongly encourage our members to seek personalised advice from one of our experts before making decisions regarding your financial future.
Right now, our advice to members is:
- Don’t panic and make snap decisions.
- Know where and how your superannuation is currently invested, for example how much share market exposure you have – you can see your investment options by logging into your account at lgiasuper.com.au.
- Ask questions – information helps fight fear and leads to better decision-making.
- Seek advice, especially if your circumstances have changed.
To find out more, please call us on 1800 444 396.
First published: 11 March 2020
