Equip's investment outlook
Investments | 25/09/2018 |
8 min read
Equip delivered outstanding results for members last financial year, and was named one of Australia’s Top 10 funds for investment returns by Chant West.
To help explain those results, and identify what separates Equip from other superannuation funds, we went straight to the source – Troy Rieck, our Executive Officer in charge of Investments.
What’s been the big story in Investments?
“The big surprises for everyone is how strong economic growth has been, particularly in the US. The concern when Trump was elected was that his policies would lead to much lower economic growth in the long term. The economy has proven to be extremely robust, almost immune to the actions of politicians. The US is experiencing extremely low unemployment, growth is very strong, inflation is still well controlled, wages are beginning to rise. Tax cuts in the US have stimulated corporate activity and business investment. The world is doing pretty well, and we’re all benefitting from that via investment returns on superannuation.”
Will it continue?
“The economy is like a super tanker, it takes a lot to turn from one quarter to the next, so our expectation is that in the next one to two years the economy is still going to be doing okay. We’ve experienced weaker growth here in Australia compared to the US, and so our concern here is what if the US slows. If we think out to 2020 and beyond, that’s our key risk. If growth slows around the world, especially in the US, can Europe, the UK, Japan and the emerging markets catch up and build on that growth."
What separates Equip from the competition, as far as our strong returns?
"We’ve done really well in three areas over the past 12 months.
1. Our infrastructure assets delivering outstanding returns for members. We own a share of Flinders Port in Adelaide, Brisbane airport, Melbourne airport and other infrastructure assets, including the port of Gdansk in Poland, these assets have experienced extremely strong returns over the last 3-5 years.
2. Equip has also done a really good job picking managers in the international equities portfolio, our allocations have performed extremely well for the last 12 months,
3. We’ve also seen great results in our foreign currency allocation. We’ve held our lowest possible allocation of Australian currency, and as the Australian dollar has fallen against the US, it’s driven up members’ balances."
How has the Rio Tinto merger affected our investment opportunities?
"We’re really pleased with how the merger has progressed and contributed to member outcomes. There are three big areas there.
1. We’ve gone to all our investment managers and asked for significant discounts. So the added size and scale of the fund has allowed us to deliver costs cuts to members.
2. At the same time we’ve consolidated the two funds investment managers, keeping only the best. So this isn’t just about cutting costs, it’s about improving the management line-up.
3. And finally, we’ve looked at best practices across both funds and how we can merge these effectively. Essential, we’re taken a ‘best of both worlds’ approach to our internal process."
What’s the plan from here?
"Our goal remains the same - delivering strong risk adjusted returns to members.
We think that markets are going to be challenging going forward, we expect that returns over the next five to ten years are going to be lower than they were previously. So we think this is an excellent time to make the portfolio higher quality and more liquid.
We’re also looking at ways to make the fund cheaper for members over time. We know this is a cost conscious world, and we want to be as efficient on fees as anyone else. We’re looking to squeeze the lemon and generate further efficiencies for our investments, which will continue on to our members."
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This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383. MySuper Authorisation Number 33813823017672 (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).