A message from our Chief Investment Officer on the recent market volatility

As you have seen in the news, the last few weeks have seen increased volatility[1] in domestic and international equity markets (share markets) due to the spread of coronavirus COVID-19, and a sharp cut in oil prices on March 9 2020.

Future Super does not invest in fossil fuels or companies that lend to fossil fuel companies. As a result, we have not had the same experience as the broader market from the cutting of oil prices. However, the effects of this cut are broad, and are not contained to the prices of shares in fossil fuel companies.

At the same time, equity markets have responded erratically to COVID-19 due to the uncertainty it brings to the economy. These events have led to a sharp drop in global equity prices over the last few weeks.

Future Super's investment team is monitoring the markets closely, as we do every day. In my 35 years of experience I’ve seen many similar events and would reassure you that they are not uncommon.

Your portfolio is diversified, meaning it invests in many different types of assets to offset risk. As well as equities, Future Super portfolios are invested in lower risk, defensive assets such as fixed interest and cash. These are intended to dampen the impact to the portfolio against equity volatility. If you are invested in the Renewables Plus Growth or Balanced Impact options, your portfolio also holds alternative assets, for which part of the selection criteria includes protection from price volatility.

Your superannuation is a long-term investment that does carry risk. Although we have recently experienced increased short-term volatility in equity markets, we do not believe this volatility will continue into the long term. Much like buying a home, we consider what influences asset prices over a 10, 20, and 30 year horizon. So, while the value of your portfolio can change positively or negatively with events like these, our focus is always on value over years and decades.

My team and I are working hard to achieve the best results from this period. We look forward to safely managing your portfolio through the next few months and into the future.

Dan East | Chief Investment Officer

[1] Volatility is a measure of the amount that prices of assets move over time. Volatility tends to increase in times of uncertainty, which has been the case over the last few weeks.


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