8 May 2023
Your super investment strategy can significantly impact your retirement outcomes. But with so many options available, how do you choose the right one?
Join Australian Retirement Trust’s Head of Private Corporate Assets, Elizabeth Kumaru, and Head of Advice and Guidance, Anne Fuchs, as they discuss how super is invested and what you need to consider when choosing an investment approach that suits your needs and retirement goals. Tune in to this must-listen episode to gain valuable insight and take control of your super.Listen to more podcasts
Hello and welcome to Super Insider,
Australian Retirement Trust's podcast and web series
that is all about investments, the economy
and strategies to make sure you maximise
your retirement savings.
My name is Anne Fuchs.
I'm head of Advice and Guidance
at Australian Retirement Trust.
The team and I love helping our 2.2 million members
make the best possible decisions
about their retirement savings.
We're sitting here today on Turrbal and Yuggera country,
and I'd like to pay my respects
to Elders past, present and emerging.
Now, Super Insider is about bringing
all of the inside knowledge to you, our members,
so that you feel really confident and empowered
about your retirement savings.
And I have to say, we've got another sensational guest
on Super Insider, Liz Kumaru.
Liz is our Head of Private Corporate Assets
here at Australian Retirement Trust.
She has 25 years of experience,
and has so much investment knowledge
and expertise in her head.
So, today, it's my job to try and extract
some of that knowledge to help you understand
and think about what is the right investment choice for you.
You would have maybe heard Brian Parker and I
talk a lot about the economy and investments,
and today it's just going,
I guess, that step further in terms of really understanding
how to approach investing for you
so you do get the most out of your super.
Now, Liz, welcome.
Thank you. It's great to be here.
Yes, and you get the joy
of our general advice warning before we begin.
So, over to you.
So, we get the big tick with Compliance.
Of course, yes.
Before we begin, I need to let everyone know
that what we're going to talk about today
is general information only.
Any advice doesn't take into account
your personal situation.
So, you should consider your circumstances
and think about getting personal advice
before acting on anything we discuss.
You can also get a copy of our Product Disclosure Statement
from our website or by calling us on 13 11 84
if you have a Super Savings account,
or 1 300 360 750 if you have a QSuper account.
Hip, hip, hooray!
Okay, gold star for us.
Now, where do we begin?
I know I talk about my kids,
have just started working and have got
their first Australian Retirement Trust account,
and are interested investors.
And then equally I know quite a few old people,
in their 70s or older people, older Australians,
who are in their 70s
and as just as interested as the young people.
So I guess where do we start
in terms of investment strategies,
and how do you as an investment team
approach this huge lifespan of people
that we have to grow and invest money for?
It might be worth while just starting with saying,
what is an investment strategy?
Oh, good idea.
Let's start with that.
So, an investment strategy is the plan
or the different mix of assets
that are most likely to achieve the objective
that you're trying to achieve.
And it's not that different -
if you can use buying a car as an analogy.
You go buy a car, that car will get you from A to B,
but you'll have certain preferences,
requirements and objectives from that car.
You might prefer a red car.
I prefer a German car.
Or you'd prefer a German car.
I'm married to a German.
Yes, you might have a big family
and so you need a car with lots of seats.
You might think about taking it off road,
so you might need a four-wheel-drive.
That is the personal circumstances and preferences
that will determine the type of car you buy.
An investment strategy is not that different.
You need to think about and understand
your personal circumstances, preferences and objectives
of what you want to achieve in retirement,
and that will help you understand what type of assets
and investment strategy suits you
to meet your objectives.
So do you think - to that, you know, starting out
where I mentioned, teenagers versus people
in their 70s or 80s.
Is it possible, with that explanation,
that at either sort of end of the bookend of life
stages around investing, you could have a similar mindset
to investing, couldn't you?
You could have similar needs
around your appetite to risk, for example?
It is possible.
So, age is definitely one determinant
that you should consider when thinking about
investment strategy that you should use.
So, in your early years,
there is a long time before you retire,
and you are still working
and you can still deliver an income.
So, you may actually be capable
of tolerating some higher risk investments
because those higher risk investments,
growth investments, like shares, for example,
can have a higher expected return over time,
but they can have volatility.
I know, Liz too - sorry to interrupt you,
but some of the portfolio that you've got, private debt
and private capital, and some of those,
are they growth assets, too?
Yes, so very happy -
maybe I should walk through the different types
of investments that you can find
in different investment options.
So, the very one that we've already spoken about is shares,
and that is owning a piece of the company.
It's also sometimes referred to as equity,
and that means that, if the company does well
and earnings grow, you will be a beneficiary in that
because you own a piece of that company
so you will do well as well.
But equally, if that company has challenging times,
that will impact the value of your investment.
So, it has the possibility
of delivering strong returns over time,
but it can have some bumps along the road,
and there is a higher risk of more volatility.
An example of that is buying shares in Woolworths or Coles,
if you shop in those supermarkets.
So, if you buy shares in Woolies and Coles,
to the extent that they deliver a good profit,
you will benefit from that as well as a shareholder.
Cash is another option, and that is literally
putting money in a bank and generating
a yield on that money. And I think we all know
that the cash rate you're getting today
is better than it was only a little while ago.
And then you've got fixed interest,
which are also known as bonds.
And fixed interest is where I will lend you money,
and in order for me to give you money,
you need to pay me a dividend yield.
And there's a really diverse range
of fixed interest or bond investments.
You can have low risk if you lend money to a government.
That's pretty comfortable
that you're going to get that yield and that money back.
So, the yield that you get from that is relatively lower.
However, if you give it to a company
that might be a little bit stressed,
in order to incentivise you to lend that money to them,
you're going to want a big return.
And so there is a big range of different types
of fixed interest instruments that you can invest in.
And then you can go to what we refer to
as our alternative asset classes,
which you talked about before.
And broadly speaking, they're unlisted.
So, you can't buy them on a standard stock exchange.
They're much more difficult to access,
but there is a huge opportunity set out there.
And so you were talking about private equity.
Just like there are companies
that are listed on stock exchanges,
there are hundreds of thousands of companies
that are operating profitable businesses
that aren't listed on stock exchanges.
It would be impossible for
people, just as an individual, to go and invest in these.
So this is why super is so exciting and cool.
Who would've thought? Because you can invest
in these amazing companies
that you wouldn't be able to otherwise.
One of the most amazing things of my role
is that I get to see some very unique
and very different investment opportunities
coming across the desk.
An unusual one that came across the desk yesterday
was a ropes business.
Ropes as in tough ropes
that they use in marine.
So, it's ropes and nets that they use in marine
and commercial-grade use.
Things that you just don't think about.
There's software that does the online booking services.
It's just an extraordinary breadth of opportunity set
that allows you to access to good investments.
I guess to your point earlier
around you as an individual member thinking about
what is the right investment for you,
Brian Parker always talks about 'sleep at night
should never be overrated'.
And if you're losing sleep at night it means maybe
it's your body telling you you're taking too much risk.
So, what would that mean, then, taking too much risk
in the context of those assets
that you were just describing for us, Liz?
Yes, it's a really great question,
and I still think back to after the global financial crisis
where my mother, like many members,
received her statement at the end of the financial year
and opened it up and realised that there was a big negative.
It had gone backwards, and she phoned me and said --
And blamed you?
And she did, the very first question was:
should I move to cash?
That old question.
That old question.
Right at the time when equity markets
or share markets had dropped considerably.
And had she moved to cash at that time,
we all know with the benefit of hindsight
that the markets have recovered fully,
she would've locked in those losses.
So, that risk tolerance question
is a really important one upfront, to understand
what is going to make you sleep at night.
If you think that you are going to sit up at night
being terrified that your balance is going to fall
because there is share market volatility,
then perhaps you need to think through your strategy,
because the last thing you want to do
is not understand that those ups and downs
are a part of that asset class,
and lock it in at the down point.
I guess it's that thinking about,
well, what is this superannuation?
Where am I in my life and what do I need it -
if it's just sitting there accumulating,
to your point earlier, you've got more runway
to be able to take more risks.
But if you're in your 70s or 80s
and you're drawing down an income,
you can understand why people are worried.
They don't want their income payments to go backwards,
because cost of living is a challenge,
and equally they want the money to last.
So that potentially - I know many of our members
like to leave a legacy.
Absolutely, and that's where age comes into consideration
and thinking through what is
the right investment strategy for you personally.
If you are retired, you're not bringing in
a salary from your work anymore.
So, perhaps you need investments that are lower risk
and that are income generating.
They're the type of questions
that you need to understand.
So, how would you then, at that point, if you're
at that retirement point, and you're drawing an income,
what's the traditional type of portfolio?
How does it look in terms of allocation
to those different pots of assets
that you were talking about, Liz?
So, it can vary, and Australian Retirement Trust
has a series of different options
depending on your personal circumstances.
Because some members can have large assets externally
in addition to their superannuation fund.
So there is no one size fits all strategy.
However, Australian Retirement Trust
does have a default option.
So if you are not ...
If you're happy to just go with the default option,
meaning that you don't make a selection
of the different types of investment strategies,
the strategy that Australian Retirement Trust builds
is a diversified portfolio of opportunity
that aims to generate wealth over time,
that progressively increases its exposure
to low-risk investments as you get close to retirement.
So, things like fixed interest and cash.
Yes, and also we were talking about
some of the alternative asset classes.
Things like infrastructure, for example,
can also be in there.
They're assets that offer
essential services to society,
which means that their earnings and income
is not necessarily generated to the global economic cycle.
So, they can provide a nice diversifying return stream.
And just to give an example
of what are infrastructure assets,
things like roads, airports, utilities,
Some of the assets that are in
the Australian Retirement Trust portfolio
that you'd be very familiar with are
Melbourne Airport, Brisbane Airport.
Well, you may have also just actually seen
the recent, a year or so ago, investment in Amplitel.
So that's the big mobile network towers.
So, they're all investments that access
to a large superannuation fund can access.
Some other options or investment types
that are available is property or real estate.
There's very broad access to assets in there as well.
I think for the members or our viewers watching,
the return, the net return, after fees
is obviously really important also,
because fees do play a role in terms of
what is the actual performance
that you're getting from your super fund.
So, what would you say, what's your advice
to our viewers and listeners around fees
and the different types of fees
for these different asset classes?
Fees do matter, so it is important to understand
what fees are being charged,
and that you are getting good value for money.
It is important to note that different asset classes
do have different costs.
So, something like those unlisted assets
that we're talking about, they do cost more to transact,
more due diligence, but the expected return
is expected to be higher to compensate you for that,
or the expected diversification benefits
are expected to compensate you for that.
And how would the fees vary between, say,
actively managed type of portfolios
versus an index approach in the shares?
And I'm talking in relation to shares.
Yeah, so in public share markets
where you have a company that is actively trying
to add value by choosing one company
or investment over another, that comes at an expense
more than if you were just replicating an index.
You need to pay for that company
to do the diligence, the time, energy and effort
to make those picks.
So, you would expect to pay a higher fee
in actively managed strategies
relative to passively managed strategies.
So, if you were to give our viewers and listeners
one bit of advice if they were thinking and looking at -
they've logged into the app, into Member Online,
and they're thinking, whether they're 25, 35, 65, whatever,
they're looking and going, 'I'm not sure.
Is this the right
investment option for me?'
If they're generally curious, what would be your ...
what would you say to them?
So, education is always incredibly helpful.
I think, like anything, at first you can get overwhelmed
by different terms not, knowing what they mean.
So, education - and I know this is going to be
right up your alley.
Private advice. It's something
you're incredibly passionate about.
But getting personal advice is incredibly helpful
because it gives you the confidence to understand
that plan that you have in place,
understand the likely ups and downs,
which will give you the confidence
to ride through that journey
and maximise your outcomes over time.
But, of course, if you do have any questions
you can call our contact centres here
at Australian Retirement Trust.
And, you know, you're right, Liz;
everyone's situation is different,
particularly the closer you get to retirement.
That's when, you know, the rubber really hits the road
about your personal circumstances.
Do you have an investment property?
Do you have other assets?
How much do you need to rely on the Age Pension?
Do you have a partner or not?
What's your health like?
How long do you need that money to last?
All of those things
will factor in to the right investment option for you.
And if you're not paying attention,
you're with a super fund that absolutely
has the best-in-breed investment professionals
like Liz here today that are pulling together
portfolios for you so that you can sleep at night,
and we are protecting your money and looking after it
so you can just live the best possible retirement.
But, Liz, I really appreciate having you on here today,
and I have to say it's wonderful to see -
I'm just going to do a shout-out because I
the investment world
has always been dominated by men.
You and I are a similar vintage,
so it's just wonderful to have
an investment professional like you
who's achieved so much.
You have a portfolio that's just extraordinary,
and you've got teenagers or young adults as well
and you sort of have this ability to do it all.
So, just wonderful to have you on Super Insider,
if I can say so.
Oh, it's lovely to be here and thank you,
and hopefully you found it helpful.
Yes, and if any of our viewers or listeners
have any questions,
we have so much content on the website,
and we have obviously lots of other investment content
on YouTube, and you can obviously download us
or watch us - or listen to us, I should say, on Spotify.
I always mess that up.
Or on Apple on that streaming podcast app
there on your phone or iPad.
So, thank you very much for joining us on Super Insider,
and we look forward to you joining us again soon.
This podcast is general information only and brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) as trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).