Coronavirus (COVID-19) Investment Update
17 March 2020
The impact of the Coronavirus (COVID-19) outbreak on investment markets has led to a significant level of global uncertainty, with share market volatility at high levels both domestically and overseas. Like all superannuation funds, this has meant BUSSQ has experienced short term negative returns over this recent period.
Watch the latest market update below.
We are now entering the fourth week of this period of uncertainty.
In the first week we saw share markets across the world fall by 10 - 15%. Over the same time period, in comparison, our default Balanced Growth investment option declined by 3.69%. This relationship between the performance of share markets and our diversified Balanced Growth option is important and is a result of:
• Not all money being invested in shares.
• Diversification across other assets including property, infrastructure, agriculture, cash and fixed interest.
• Our active investment management allowing us to closely follow the situation daily and act where suitable.
What BUSSQ are doing
BUSSQ is doing everything we can to work with our investment managers to ensure the situation is managed appropriately. For some time BUSSQ has been concerned about valuations and as such we have had in place a strategy which acts like an insurance policy (known as a derivative strategy) that protects some of the portfolio against sharp negative movements. These do not remove all the movement but act to soften the impact to our members.
We understand that no one likes seeing their hard earned superannuation decrease in value and that times like this can be very difficult, especially for those in or near retirement.
We have long advocated that you invest for the purpose of these funds – for your retirement, but often the hardest part in all of this is that there are no right or wrong answers.
If you are younger and not looking at retiring for another five years or more, then our message is simple, do not panic, however, we understand this is easier said than done.
Switching to a safe investment option like cash will only lock in the losses incurred already and may place you in a position, when the market recovers and rises again, that you miss out on the market recovery. Also, cash returns in the future will be very poor as interest rates in Australia fall dramatically. In fact, it’s possible that your money could go backwards and not keep up with inflation. Another factor to be aware of is that every time your account receives a contribution the money is being invested at the new lower price.
We know that members nearing retirement will use their superannuation to create a long term income stream to support their retirement. These members may wish to review their investment allocations to ensure they are appropriate, and we are here to help you with those decisions.
If you are in retirement this can be a very difficult time. We know many of our retired members have had their income streams set up with a cash allocation that their pension payments are coming from. This is also our default set up for these income streams. This set up is specifically designed to ride out times like now so you are not forced to sell assets that have decreased in value to fund your lifestyle. We suggest you talk to one of our experts and we are committed to being available to members to have these conversations.
What we do know is that at present investment markets are reacting wildly to news and current events and are likely to do so whilst this all plays out. We are seeing some significant daily movements both positive and negative. In the last two weeks we have seen some of the worst days since the GFC and the 1987 crash coupled right beside some of the biggest and best trading days. Take last Friday 13 March 2020 in Australian markets as an example. The day started down and fell around 8% at lunch time. By the end of trading the market closed up 4%. The US was also up on Friday night.
During these challenging times we will continue to actively manage our members retirement savings. This will include looking for opportunities where appropriate when markets fall. We will continue to maintain a diversified portfolio of investments, including unlisted assets such as property and infrastructure which have provided some protection against volatility in global markets.
This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. Past performance is not a reliable indicator of future performance. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201).