Market update: Members urged not to make snap decisions

Deputy Chief Investment Officer, Kevin Wan Lum

8 February 2022

Upheaval in global sharemarkets in January 2022 saw some of the worst returns since March 2020 across Australia’s superannuation industry.

While many LGIAsuper and Energy Super members may be concerned about the effect of volatility, Deputy Chief Investment Officer Kevin Wan Lum urges members not to make any rushed decisions and remember that super is a long-term investment.

Instead, members can make use of the fund’s complimentary personal advice on a single topic related to super or a Super Health Check, at no additional cost.

What is happening in the market?
After another solid year of returns in 2021, with Australian shares returning 17.5% (ASX 300) and international shares returning 25.8% (MSCI ACWI in AUD), sharemarkets took a sharp turn in January 2022.

This sudden market sell-off came from increases in inflation and interest rates in several economies including the US and Europe. Financial markets are reflecting this uncertainty and economic impact with lower share prices and higher bond prices.

How is this affecting my superannuation?
Most members, particularly those nearing retirement, are invested in the default MySuper product. While MySuper has some exposure to international and Australian shares, it currently has approximately 50% of funds allocated to other asset classes, reducing the impacts of sharemarket volatility. The MySuper option remains positive for the financial year to date despite recent volatility and produced returns of above 15% for the previous financial year.

Those members who have chosen to invest in higher-risk options will have seen the greatest impact of the recent volatility on their superannuation balance. While this may be concerning, it is important to remember that we hope to eventually see a bounce back. This is what happened after March 2020, where sharemarkets globally first fell around 30% in a month, only to recover those negative returns within 12 months.

What is LGIAsuper doing to protect my investments?
We continue to invest for the long term. We are protecting members through our diversified investment program, spreading members’ money across a range of shares, property, infrastructure, debt, and other growth assets.

Significant falls in the price of investments also create opportunities for the fund to purchase quality assets at a much cheaper entry point, much like the fund did between May and September 2020 after the initial impact of COVID-19.

This long-term approach has been recognised by independent superannuation research and consulting company, SuperRatings, which has awarded the fund ‘Platinum’ ratings on several of its products for 14 years in a row, including the fund’s MySuper, Accumulation, Pension and Market Linked Pension products. The fund was also assessed as one of the ‘Highest Quality Funds’ by Chant West in its most recent rating report.

As a boutique fund, we are committed to adapting to the ever-changing markets to maximise returns for our members while delivering opportunity and investment security. In November 2021, LGIAsuper and Energy Super removed the weekly administrative flat-rate fee and capping the annual percentage-based administration fee at $900 per year.

What if you see your balance dropping? 
Superannuation is a long-term investment, so keeping your investment timeline in mind is crucial when the market is turbulent. Talk to our superannuation specialists or financial advisers before deciding how your super is invested.

LGIAsuper and Energy Super offer a range of personalised financial advice and online tools to assist members. This includes single issue advice, comprehensive advice, and our free 30-minute Super Health Check.

Call us on 1800 444 396 to discuss the type of appointment that would suit you best.

* 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.