Agenda. Economic update LGsuper s investment approach Making an investment choice Where to from here

Transcription

1 Investing your super 2015 The Queensland Local Government Superannuation Board ABN AFS Licence Local Government Superannuation Scheme ABN

2 Agenda Economic update LGsuper s investment approach Making an investment choice Where to from here

3 ECONOMIC OUTLOOK Marayka Ward November 2015

4 IMPORTANT INFORMATION QIC Limited ACN ( QIC ) is a wholesale funds manager and its products and services are not directly available to, and this document may not be provided to any, retail clients. QIC is a company government owned corporation constituted under the Queensland Investment Corporation Act 1991 (Qld). QIC is regulated by State Government legislation pertaining to government owned corporations in addition to the Corporations Act 2001 (Cth) ( Corporations Act ). QIC does not hold an Australian financial services ( AFS ) licence and certain provisions (including the financial product disclosure provisions) of the Corporations Act do not apply to QIC. Please note however that some wholly owned subsidiaries of QIC have been issued with an AFS licence and are required to comply with the Corporations Act. QIC Global Infrastructure is a business division of QIC. To the extent permitted by law, QIC, its subsidiaries, associated entities, their directors, employees and representatives (the QIC Parties ) disclaim all responsibility and liability for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly through relying on the information contained in this document (the Information ), whether that loss or damage is caused by any fault or negligence of the QIC Parties or otherwise. A number of the statements are based on information and research published by others. No QIC Party has confirmed, and QIC does not warrant, the accuracy or completeness of such statements. Past performance is not a reliable indicator of future performance. The Information includes statements and estimates in relation to future matters, many of which are based on subjective judgements or proprietary internal modelling. No representation is made that such statements or estimates will prove correct. The reader should be aware that the Information is predictive in character and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. This Information does not constitute financial product advice and you should seek advice before relying on it. In preparing this Information QIC Global Infrastructure and the QIC Parties have not taken into account any investor s objectives, financial situations or needs. Investors should be aware that any investment in QIC products involves a degree of risk and none of QIC Global Infrastructure, the QIC Parties or the State of Queensland guarantees the performance of any investment, the repayment of capital or any particular amount of return. Any investment is not a deposit or other liability of any QIC Party. Copyright QIC Limited, Australia All rights are reserved. 4

5 FINANCIAL MARKETS HAVE FALLEN SHARPLY IN THE SEPTEMBER QUARTER Due to concern over prospects for global economy 7,000 S&P/ASX 200 Index 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3, Source: Bloomberg 5

6 FEARS AROUND A HARD-LANDING IN CHINA ARE A KEY CONCERN Confluence of factors causes growth to stall in early China - Caixin Manufacturing PMI Source: Thomson Reuters, QIC. 6

7 CHINA IS NAVIGATING A DIFFICULT TRANSITION But authorities should be able to manage to avoid a hard-landing 16 China - Real GDP growth (% annual average) Note: Grey shaded area represents QIC forecasts. Forecast results are predictions only and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. Source: Thomson Reuters, QIC. 7

8 ONGOING GRADUAL RECOVERY IN ADVANCED ECONOMIES Modest growth to continue in the global economy 10 8 Real GDP growth (PPP basis, % annual average) Developing and emerging economies 6 World Advanced economies Note: Grey shaded area represents QIC forecasts. Forecast results are predictions only and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. Source: Thomson Reuters, QIC. 8

9 GLOBAL ECONOMY Summary of QIC views Global economy Global economy to gradually recover over the coming five years Progress to be uneven across countries and many risks exist Lower oil prices will cause many advanced economies to temporarily experience deflation US and UK Recovery is being led by the US and UK, with ongoing above-trend growth Fed and BOE begin to raise rates over the coming year due to tightening labour markets Nonetheless, the benign inflation outlook will lead to a slow tightening cycle Europe and Japan Outlook for the euro area and Japan is expected to slowly improve Recovery requires ongoing aggressive monetary easing by both the ECB and BOJ Substantial structural reforms are also required in both countries Risks remain to the downside China Chinese economy has slowed, weighed down by a cooling property market Chinese authorities are navigating a difficult economic transition, but authorities should be able to avoid a hard-landing Chinese growth to moderate over the next five years, and risks will remain to the downside 9

10 AUSTRALIAN ECONOMY CONSTRAINED BY MINING AND FISCAL HEADWINDS Falling mining investment / commodity prices and fiscal tightening represent key headwinds 175 Spot commodity prices Asian LNG (RHS, US$/mmbtu) 21 Fed. Govt - underlying cash balance (% of GDP) Thermal coal (LHS, US$/t) Iron ore (LHS, US$/t) Source: Bloomberg, Thomson Reuters, QIC. Note: Red columns represents Australian Treasury forecasts. Source: Australian Treasury, QIC. 10

11 INSUFFICIENT TRANSITION TOWARDS NON-MINING SECTORS Evidence of transition currently limited to sectors with high AUD or interest rate exposures 12 Australia - Key growth sectors (per cent) Australian dollar against the US dollar It'al student no.s (ytd%, Jun-15) Rural exports (yoy%, Q2 2015) Tourist spending (FY%, 14-15) Housing investment (yoy%, Q2 2015) Real GDP (yoy%, Q2 2015) Source: Bloomberg Source: ABS, QIC. 11

12 INSUFFICIENT TRANSITION TOWARDS NON-MINING SECTORS Confidence among non-mining businesses and consumers still struggling to improve Australia - NAB Business Survey (sa, net balance) Source: Thomson Reuters, QIC. Conditions Confidence Australia - Westpac/MI Consumer Confidence (Index) Source: Thomson Reuters, QIC. 12

13 Sydney Melbourne Brisbane Adelaide Perth Canberra Darwin Hobart All Sydney Melbourne Brisbane Adelaide Perth Canberra Darwin Hobart All ARE WE IN A HOUSING BUBBLE? Valuations and affordability are clearly stretched in Sydney and Melbourne Dwelling price gains over past year (%, Sept- 15) 20 Gross rental yields (Houses, %, Sep-15) Source: RP Data, QIC. Source: RP Data, QIC. 13

14 ARE WE IN A HOUSING BUBBLE? 15 Supply is responding to the higher prices Australia - RP Data house price index (% y/y) Australia - Building approvals (000s, annualised, sa) Source: Bloomberg, QIC. Source: ABS, QIC. 14

15 5 AUSTRALIAN OUTLOOK Below-trend growth to persist in the short-term Australia - Real GDP growth (%, annual) 8 Australia - Cash rate (%) Cash rate QIC - 21/9/ Note: Red columns represents QIC forecasts. Forecast results are predictions only and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. Source: ABS, QIC. 30-day interbank cash rate futures - 21/9/ Note: Dark red line represents QIC forecasts. Forecast results are predictions only and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. Source: Bloomberg, QIC. 15

16 CONCLUDING REMARKS Global economy is experiencing a cyclical recovery within a structural downturn But progress is uneven and many risks exist Central bank liquidity has led to a sharp rally in asset prices Some market participants are concerned that a reversal in policy could lead to a sharp correction in valuations Interest rates will rise gradually, but to lower levels than experienced historically Dichotomous monetary policy to lead to increased volatility Australian outlook remains constrained, reflecting mining and fiscal headwinds Mining investment to continue to fall sharply as low prices won t lead to any further large-scale projects Mining exports will flatter headline growth (as LNG projects are completed), but underlying domestic demand will remain subdued RBA required to keep rates at 2% for an extended period, with risks of further cuts 16

17 Disclaimer This seminar provides general information only. It has been prepared without taking into account your individual objectives, financial situation or needs. You must not rely on this information alone as a sole or primary source of advice or guidance for the purpose of making decisions about your superannuation options. If you are interested in exercising your options in LGsuper in relation to a matter referred to in this presentation you should obtain the relevant Product Disclosure Statement and consider contacting an LGsuper representative who can give you appropriate advice which does take into account your particular objectives, financial situation and needs.

18 LGsuper s approach

19 Investment philosophy To provide: a secure source of retirement income for members strong, consistent levels of return capital protection in poor market environments

20 Diversification Asset classes Shares, property, bonds, cash Industries Banking & finance, IT, resources, retail Location Australia, overseas, emerging markets Managers Active, passive, value, growth, small-cap, midcap, large-cap

21 Professional managers A focus on governance In-house experience Sector specialists Niche assets

22 Top holdings Top 10 Australian shares at 30 June 2015 BHP Billiton Westpac CBA ANZ QBE Insurance Rio Tinto Woolworths Macquarie NAB AMP LTD Top 10 International shares at 30 June 2015 Simon Property Group Apple Roche Holding Mastercard Microsoft Corp Citigroup Inc JP Morgan Chase & Co Bat Inc Visa Inc Merck & Co Inc

23 Top holdings Top 10 Property funds at 30 June 2015 Altis AREEP AMP Property Resolution Global REIT QIC Shopping Centre Fund GPT Wholesale Office Fund Lend Lease APPF Retail Dexus Wholesale Property Fund Orion European Real Estate Fund IV CV Clearbell II UT LP Retirement Villages Group Top Diversified Fixed Interest 30 June 2015 Domestic Fixed Interest Colonial First State QIC Ardea ILB International Fixed Interest PIMCO Wellington Global Goldman Sachs

24 Making the best choice

25 What to consider Timeframe Expected return Risk tolerance

26 Your options Default - MySuper Ready-made Single asset Socially responsible

27 MySuper Default option Strategic asset allocation (under age 75)

28 Return target Comparison between return target and return MySuper Lifecycle s Under 75 predecessor product Diversified Growth. Past performance is not necessarily an indication of future returns.

29 Ready-made options Defensive Stable Balanced Diversified Growth Aggressive Return-seeking Risk-controlling Expected return * Negative return expectation ** 22% 42% 63% 89% 100% 78% 58% 37% 11% 0% 2% 2.5% 3.5% 4% 4.5% * Average annual return above CPI over rolling 5-year periods. ** Number of years in each 20-year period returns are expected to be negative

30 Is cash risky? Low return Inflation risk

31 Staying on track Set an appropriate strategy Align with timeframe Understand return & volatility Enjoy retirement

32 We re here to help Information Advice Guidance about your options Designed specifically for you

33 A fund you can trust Platinum rated (SuperRatings) Low fees Solid investment performance Competitive insurance cover