Overcoming global challenges to provide consistent long-term returns

The 2017/18 financial year was a challenging year for our industry. While some funds struggled to respond to pressures from the Royal Commission and a volatile global market, LGIAsuper’s strong governance and long-term investment vision has put our members in good stead to weather the challenges and expect consistently strong investment returns over the long term.

Overcoming global challenges to provide consistent long-term returns

First published: December 5

We have been generating positive returns for Queenslanders for more than 50 years, and this success is driven by our innovative and robust investment framework. The benefits of this framework are shown through our Diversified Growth option that has returned +9.4% for the 2017/18 Financial Year; 4% above our investment objective. LGIAsuper’s Balanced option returned +7.5%.

Recent results are backed by a track record of high performance dating back decades, with LGIAsuper’s default investment option returning +9.15% p.a. over 30 years. Our embedded approach to investment diversification meant our investment portfolio was well prepared for the Global Financial Crisis (GFC), the Asian Financial Crisis (AFC) and Dot-com bust. This history is partly why Australian Prudential Regulation Authority (APRA) data placed LGIAsuper as one of Australia’s top ten superannuation investment performers of the last decade1

This achievement is driven by our investment in underlying, stable markets such as infrastructure and property. Our investment in infrastructure assets, predominantly in Queensland and Australia, led to a stellar 29.2% return before fees and taxes in the 2017/18 financial year. LGIAsuper’s highly diversified property portfolio performed consistently well, supported by low gearing and low vacancy rates, with fully hedged gains of 10.15% before fees and taxes, during the same period.

Diversify to offset low returns 

LGIAsuper’s diversified investment framework provided solid returns last financial year, despite moderate global economic growth, the gradual withdrawal of monetary policy accommodation and a return of volatility in equity markets. Our investment team offsets low returns from cash, bonds and alternatives by strong returns in property and equities, both on a domestic and global scale. 

While volatility in the markets can be unsettling, LGIAsuper’s diversified investment framework is prepared for natural short-term market movements. 

LGIAsuper CEO Kate Farrar said October’s volatile market activity resulted in some members switching their investment strategy to defensive options, but this was not the best solution for anyone looking to grow their super savings in the long-term.

‘Markets naturally follow an ‘up and down’ trajectory but, with smart, diversified investments, members will see their returns increase in the long-term,’ Ms Farrar said. 

‘On October 30, Australian shares rallied from a 36-point loss at the open to deliver the biggest one-day gain since July 20172, which is just one example of how quickly markets can change.

‘While pursuing more defensive options in response to market fluctuations may seem sensible in the short-term, retirement savings need to be viewed through a longer lens – as the old saying goes, it’s about time in the market not timing the market, the worst of days are often followed by very positive days.’

Playing the long game for positive retirement outcomes

Our investment team considers a variety of factors when setting the fund’s long-term investment goals. While global growth appears likely to remain solid, LGIAsuper’s investment framework considers the maturing business cycle and escalating global trade risks as the Trump administration implements a range of protectionist policies.

We are preparing for these impacts by investing in diversified businesses globally and public infrastructure and industries that can deliver consistent returns. 

In strategically preparing for the future, LGIAsuper’s investment strategy aims to minimise the effects of volatile markets on your super and deliver positive retirement outcomes for our members.

Backing local communities

Through LGIAsuper’s diversified approach, a fall in one asset class may be offset by better performance from another asset class less prone to volatile movements. Within asset classes, we diversify even further by spreading investments across different investment managers and strategies, as well as different industries and sectors.

From our 100% ownership of Rockhampton’s Fitzroy River macadamia farm to the 32.5% ownership in the growing Sunshine Coast Airport, our moderate risk, moderate-to-high return, growth assets are chosen based on their long-term stability.

These community-based investments benefit members and whole communities across Queensland. We take our role in providing sustainable retirement outcomes for Queenslanders seriously, and work hard to ensure the positive impact of our investments filters through to local communities. 

For more information about how LGIAsuper is investing your money for the future, please call us on 1800 444 396.

1.Source: Australian Prudential Regulation Authority Annual Fund-level Superannuation Statistics June 2017, Ten year rate of return, issued 28 March 2018.
2.Source: Australian Financial Review