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COVID-19 and your super updates

Last updated: 3 April 2020

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The latest on the COVID-19 situation

Despite some recent gains, share markets remain extremely volatile and major share market indices are still well below their February highs. Fixed income markets, which had been performing strongly as investors sought the safety of government bonds, came under selling pressure as investors sold bonds to raise liquidity. More recently, aggressive bond buying steps from the world’s central banks have eased those pressures.

Economic conditions across the much of the world continue to deteriorate as measures to limit the spread of the virus severely disrupt economic activity. Although China’s economy, the first to feel the impact of the crisis, has begun to show early signs of recovery. 

Both governments and central banks across the world have stepped up their response to the crisis. Aggressive fiscal and monetary policy steps to reduce the impact of the crisis on economic activity have been announced, and health authorities stepped up their response in those countries that had previously been slower to act.  

Here in Australia, output and employment have fallen sharply, and the economy is likely in the midst of recession. The policy response has been unprecedented, and, while unable to prevent the recession currently unfolding, it will certainly cushion the blow on both households and businesses and help to underwrite the eventual recovery. 

Latest evidence suggests that infection rates in the worst affected parts of Europe are beginning to slow, although there are few indications to date that infection rates are slowing in either the UK or the US. Here in Australia, reported cases continue to climb, but infection rates have begun to decline in recent days.

 

The economic impacts of coronavirus

There is no doubt that the economic impacts of coronavirus on China are likely to be severe – the country’s GDP will almost certainly show a steep decline in the March quarter. Beyond China, the economic impacts are also likely to be severe: the direct impact of a decline in China’s economy, which accounts for around 16 per cent of world GDP; the indirect impacts through disruptions to supply chains across the Asia Pacific and elsewhere; the impacts on travel and tourism.  The increasingly severe measures adopted in many countries to limit the spread of the virus is causing severe, but temporary, disruption to the global economy. Here in Australia, tourism and education exports have been severely disrupted, and the additional measures to restrict the spread of the virus are having serious and rapidly unfolding impacts on employment and production, particularly in in the retail and hospitality sectors. The RBA’s actions and the government’s substantial fiscal measures – most critically, the wage subsidy scheme announced on 30 March will support activity and employment over the coming months. However, it will take several weeks for money to flow in meaningful amounts to businesses and households. More may need to be done, and the government has clearly signalled its intention to provide further support.  

Much of the economic news that will emerge across the world and here in Australia over the coming months will be very negative. However, it is important to remember that financial markets are forward looking: much of the adverse economic news we are likely to see has already been reflected in sharply lower share prices and bond yields. This means that while bad economic news still has the potential to unsettle markets, the response of policymakers and indications of how effective the virus control measures have been are likely to be more important in determining how financial markets perform in the near term. 

 

How is Sunsuper responding?

Our investment team is highly experienced and well qualified to manage your superannuation investment through this market volatility. We are monitoring developments constantly and closely and are also in constant contact with our investment managers across the globe. 

Unfortunately, like every other investment manager, we have no way of knowing with any certainty how the COVID-19 outbreak will evolve from here, or how the economy and financial markets will evolve over the course of this year. But at Sunsuper, we don’t invest money on the basis of our own, or anyone else’s short-term economic or market forecasts. Our goal is to carefully construct portfolios with a view to meeting their medium to long-term investment objectives. For our diversified investment options, we build portfolios that are well diversified across different asset classes, different countries and regions and different industries. That goal and approach hasn’t changed.

Despite this uncertainty and volatility, we are not reducing our exposure to shares or other growth assets. In fact, we have taken the opportunity to modestly increase our exposure to domestic and international share markets across our diversified options in a careful and risk-controlled manner. We have taken this step because after their recent falls, share markets are now much more attractive value than either fixed income or cash investments.

 


Investing in alternative asset classes

Sunsuper continues to hold a significant allocation to alternative asset classes, particularly the key unlisted asset classes – property, infrastructure and private equity. We hold these assets because they deliver strong, long-term returns, while reducing our members' exposure to share market volatility – particularly in times such as these. These assets are not immune to market and economic shocks. Given the state of the world and Australian economies, the value of these assets has declined, and this has been reflected in unit prices and the performance of Sunsuper’s funds. However, in a crisis such as this, these assets tend to hold their value to a greater extent than Australian and international shares. 

Read more about how Sunsuper is managing the illiquidity risk of our alternative asset investments and how we value our alternative assets. 

 


Our latest updates on COVID-19

Watch our webcast recording

In this special New School of Super webcast, Chief Economist Brian Parker discusses the latest on the COVID-19 situation and answers members’ questions, including how long we think the crisis will last, how we invest your super, and the implications of moving to a more conservative investment strategy. 
 

Watch Brian’s latest video update

Chief Economist Brian Parker speaks with ABC News on the economic impact of the COVID-19 outbreak, particularly on members’ super investment. (Video credit: ABC News) 
 

Listen to our latest podcasts and audio message

In episode 30, Brian covers the global response to the crisis to date, how Sunsuper’s default investment option aims to protect members’ superannuation savings in challenging times, and the importance of members seeking financial advice before making any changes to their super investment strategy.

 

And in episode 31, Sunsuper’s Head of Asset Allocation outlines how Sunsuper is responding to the impact of the coronavirus on share markets, including how he and his team construct Sunsuper’s investment portfolios with members’ best interests at heart, how asset allocation works, and how he uses the power of diversification to cushion the blow of market downturns on members’ retirement savings.

Don't miss our future podcast episodes: subscribe and listen through Apple Podcasts and Spotify.

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Listen to Brian’s audio message to members

You can also listen to Brian’s audio message to members.

To speak to a Sunsuper financial adviser, please call us on 13 11 84.

Past performance is not a reliable indication of future performance. Sunsuper employees provide advice as representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818 AFSL No. 227867) (SFS), wholly owned by the Sunsuper Superannuation Fund.