Investments Update: On-Going Market 2019
2019 is shaping up to be another year of strong returns for the Fund, with international share markets contributing significantly to member returns. Our diversified strategy, which includes infrastructure, property, private equity and fixed interest, has helped smooth returns during bouts of heightened volatility throughout the year.
A number of factors have contributed to the volatility in investment markets, including:
- A slowing Australian economy.
- On-going uncertainties around the Brexit deal.
- Escalating and de-escalating trade tensions between the US and China.
- Geopolitical tensions including drone strikes on Saudi Aramco oil facilities and the on-going riots in Hong Kong.
- The announcement of an impeachment inquiry into President Trump’s interactions with the Ukraine.
- Slowing US and European economies.
- Central banks introducing monetary policies aimed at increasing economic activity and lifting both consumer and business confidence.
Moving forward, we expect that the Australian economy will stay under pressure supporting the case for infrastructure spending and long-term low interest rates. On a global level, the unresolved geopolitical and trade events, along with weakening economic conditions, have the potential to negatively impact market returns.
Investments team will continue to monitor market movements as well as the actions of policy makers and central banks and adjust the Fund’s investment strategy and portfolio positions to maximise long-term returns for members. Weakening global economic conditions as well as continued instability in global markets, stemming from geopolitical and trade tensions, lead the Fund to remain cautious and maintain a more defensive portfolio position. Here are the main changes the investment team have made to the PreMixed options to reduce the impact of market volatility while continuing to seek long-term opportunities to provide value to members:
- We continue to hold a neutral position to shares and favour international over shares. We also favour private equity assets given their potential to deliver stronger returns compared to shares over the long-term.
- We have a higher weighting in fixed interest given the weaker economic outlook, expected rate cuts and continuing low inflation. Longer term bonds are preferred over cash as these provide a higher return in the low interest rate environment.
- We continue to favour infrastructure assets in our unlisted assets portfolio. With interest rates likely to stay low for some time and listed markets facing pressure, we are looking for additional global opportunities. Infrastructure assets are expected to benefit member returns in the current environment.