Investment strategy proves wise - March 2016

Down … then up

For investment markets, the three months to the end of March 2016 was a story of two distinct periods.

The first half of the quarter saw big falls due to investors’ concerns about the Chinese economy. Then the markets rose significantly over the next six weeks as oil and iron ore in particular rallied off their low points.

REI Super’s investment strategy again proved to be very successful during the quarter. Our response to the volatility – as always – was to remember that we’re a long-term investor and we didn’t over-react.

REI Super continues to deliver top quartile returns

The result of our strategy was that the Trustee Super Balanced option achieved a net return of 0.30% for the quarter, which, while a modest return in itself, was significantly ahead of the median* superannuation fund balanced option’s return of -1.07%. 

Our performance has once again placed REI Super in the top quartile* of superannuation funds in industry surveys. And when you look at our longer term performance, in the seven years to 31 March 2016, REI Super’s Trustee Super Balanced option has provided members with an average annual return of 9.56%.

Where our good returns came from

The main contributors to our strong performance during the quarter were our fixed income and our emerging market shares portfolios. Our Australian shares managers also performed well through good stock selection, particularly by having reduced their exposure to the banks, which performed very poorly.

Investment outlook

Over the next three years we believe the investment environment will continue to be very volatile but that nevertheless the world is returning to a steady growth state.

The challenge for investors in this environment is that markets are already fully valued and anticipating a future rise in interest rates  which is likely to reduce the prices of stocks and other growth assets.  With these two factors in play (high volatility, and record low interest rates), we are expecting to see low single-digit returns in the medium term rather than the high double-digit returns of recent years.

Our focus at REI Super is to continue to safeguard members from losing capital and to maximise their returns by:

• Investing less when markets are expensive and investing more when they are cheap
• Diversifying across a range of different types of assets, countries, industries and currencies and by
• Identifying investments that offer good value and a good return for their level of risk

*SuperRatings Crediting Rate Survey March 2016

Net investment returns for the period ended 31 March 2016

REI Super’s main investment options

*Median returns

**No SuperRatings benchmark available

Image courtesy of Renjith Krishnan at FreeDigitalPhotos.net