Hi, my name is Graeme Miller and I’m the Chief Investment Officer at TelstraSuper. In today’s video I’ll be speaking about investment returns for the three months to 30 September 2019.
What’s been happening in global economies investment markets in the September quarter?
It has certainly been an interesting and eventful quarter.
The trade dispute between China and the United States continues to dominate the headlines. There’s been a lot of talk, but almost no action, in finding a resolution to this ongoing spat between the world’s two largest economies. As the dispute has dragged on, investors have become increasingly concerned that it will result in a slow-down in economic growth.
Turning to the UK, the Brexit shambles rolls-on. The newly appointed Prime Minister, Boris Johnson, is doing everything he can to ensure that the UK leaves the European Union by the end of October. However, there is no indication that he’ll be able to reach an agreement with the European Parliament on the terms of the exit, and the UK Parliament has now passed a law that prohibits Brexit from occurring without a deal. Boris Johnson has lost his majority in the Parliament and has called for an early general election, which the Parliament has rejected. It’s really anyone’s guess how this play will out, but the uncertainty continues to make markets nervous.
But these aren’t the only political hotspots around the world. We continue to see violent protests in Hong Kong and tensions in the Middle East, most recently the bombing of a Saudi oil field.
And if that wasn’t enough, the United States Democrats have commenced an impeachment investigation against President Donald Trump, claiming that he tried enlist the Ukrainian president to discredit Democrat Presidential hopeful Joe Biden.
So how did investment markets perform in the September quarter?
Given the economic and political backdrop, it’s no surprise that investment markets were quite volatile during the September quarter. The months of July and September were generally positive for share markets, but August was quite negative.
However overall, things were generally positive. The Australian share market returned 2.4% for the quarter, and the US share market was up by 1.7%. The Australian dollar fell in value against most foreign currencies, which boosted returns for Australian investors in overseas assets.
One of the biggest investment stories over the quarter, was falling interest rates. In Australia, the Reserve Bank has cut the official short term interest rate in June, July and October of this year, taking it to just 0.75% - the lowest its ever been. The US Federal reserve similarly cut its short term interest rates in July and September, and many investors expect further rate cuts in the near term.
Long term interest rates also fell sharply during the quarter. These lower interest rates provided a boost to fixed interest investments which were up by about 2% over the quarter.
How did TelstraSuper’s investments perform in the three months to 30 September 2019?
I’m delighted to report that all of TelstraSuper’s diversified investment options delivered positive returns in the September quarter. In the accumulation section of the Fund, our Growth option earned 2.6%, our Balanced option earned 2.3% and our Conservative option earned 1.5% for the quarter. These returns are net of all investment taxes and investment fees.
Returns for our Retire Access pension members were higher because pension members don’t pay tax on investment earnings.
How are TelstraSuper’s portfolios currently positioned?
At the current time, our portfolios are somewhat defensively positioned. Our exposure to shares is about 2% lower than usual in most options, and we’re holding less fixed interest securities than usual. We’ve also been building our exposure to infrastructure and property assets.
We believe that this moderately defensive positioning is a prudent way to position the portfolio, given that we appear to be in the late-stage of an economic cycle, geopolitical risk is high, and most asset prices are elevated. Under this positioning, our members should continue to enjoy most of the benefits of continued investment strength, but also be more protected in the event of a significant market fall.
It’s a privilege to be entrusted with the management of your superannuation and retirement savings. As always we will continue to manage your investments in a prudent and proactive manner – remaining vigilant to identify both opportunities and risks as they emerge.