Market update: Members told to look at the long-term to protect purchasing power

4 March 2022

With February proving to be another tumultuous month for Australia’s superannuation industry, Chief Investment Officer (CIO) Mark Rider has advised LGIAsuper members to be aware of their risk profile and consider the long-term impacts of their investment decisions before making snap decisions to switch.

Mark was appointed Chief Investment Officer of our fund in February 2022 to deliver investment outcomes for our members and manage our investment team and external managers. Mark has more than 34 years of experience in the financial services industry and has managed investments through many significant market shocks.  

Prior to joining our fund, Mark served as the Chief Investment Officer of Christian Super, helping the fund navigate change in the external business environment following the market crash brought on by COVID-19.

To help our members understand how the current market impacts their superannuation, Mark has compiled this month’s market update. Members can also make use of the fund’s complimentary personal advice on a single topic related to their superannuation or a 30-minute Super Health Check, at no additional cost.

What is happening in the market?
After the sudden market sell-off in January, which was attributed to increases in inflation and heightened expectations about rising interest rates, we have experienced another turbulent month.

In the latter half of February, we saw investors trade on the basis of concerns about Russia's invasion of Ukraine and the flow on impact to economies and markets. In particular, energy prices rose, reflecting uncertainty about the supply of Russia’s oil and gas exports, and global equity markets weakened on concern about the economic outlook. We also faced devastating floods close to home, which we understand likely impacted many of our members and raised concerns for our real assets in the community.

We have communicated with our Investment Managers regarding flood preparedness for these assets and we do not expect an impact. Our Investment Managers and the Fund will also continue to monitor the situation in Russian markets and make any decision regarding our holdings in our member’s best financial interest.

How is this affecting my superannuation?  
So far this year, and especially in the past month, we have seen equity markets pulling back from the highs they achieved only a few months ago and fixed income investments posting negative as interest rates rose. 

While we understand how concerning this volatility may be to members, the market adjustments need to be considered in the context of how well markets have performed in recent times. In March 2020, share markets globally fell around 30% in a month. The majority of these markets recovered these negative returns within 12 months, and many have since outperformed their pre-COVID levels.

What is LGIAsuper doing to protect my investments?
We work to protect our members’ investments by building a diverse portfolio, which spreads our investments across international and Australian shares, as well as a range of different asset classes, including property, infrastructure and private equity. By diversifying our investments, we help our members manage their risk exposure, reducing the impacts of market volatility. 

Our Investment Managers monitor markets and consider the short- and long-term financial impacts of investment decisions to ensure we act in the best interests of our members and in keeping with our investment philosophy and our regulatory and legal obligations. Our managers and the Fund will continue to monitor the situation and make any decision regarding our holdings in our members’ best financial interest.

What should I do if I am close to retirement? 
For our members nearing retirement, we understand the current market volatility may be particularly concerning. It is important that our members consider their risk profiles. Our members who have chosen to invest in higher-risk options will have seen the greatest impact of the volatility on their superannuation balances, while those in our lower-risk options, such as our default MySuper product, have reduced their risk by investing in a more diversified portfolio. 

Above all else, we urge our members entering retirement to evaluate the benefits of remaining invested rather than liquidating their assets. Converting your superannuation into cash may reduce your purchasing power in the long run as inflation rates rises.

Before making decisions regarding your financial future, seek personalised advice from one of our experts. Our fund offers personalised financial advice and online tools to assist members. Book a 30-minute Super Health Check, or for comprehensive advice, our superannuation specialists and financial advisers are available to help you on 1800 444 396.

ESI Financial Services Pty Ltd (ESI Financial Services, ABN 93 101 428 782) (AFSL 224952) is a wholly owned entity of LGIAsuper. ESI Financial Services has engaged Industry Fund Services Limited (IFS) ABN 54 007 016 195 AFSL No 232514 to facilitate the provision of financial advice to members of LGIAsuper. LGIAsuper Financial Advisers are Authorised Representatives of IFS. In limited circumstances, a LGIAsuper Financial Adviser may also be an Authorised Representative of ESI Financial Services.
Additionally, LGIAsuper has also engaged Link Advice Pty Limited ABN 36 105 811 336, AFSL 258145 to provide LGIAsuper members with access to limited personal advice over the phone in respect to LGIAsuper and Energy Super products.