Coronavirus, the markets, ethical super… and your questions answered.

Coronavirus, the markets, ethical super… and your questions answered

Don’t understand a term used in this article? That’s ok. Financial markets and investing is our area of expertise, and probably not yours. Head to the end of the article, I’ve included a glossary.

I’m not going to sugarcoat what is going on right now in the financial markets. The past weeks have been turbulent.

So I am reaching out to ensure you feel supported to understand the market situation, and also to understand how Verve Super is responding.

If you’ve been watching or reading the news, then you’ll know that the share markets in Australia and globally are experiencing a period of high volatility, with significant price drops across almost every sector. This is due to the spread of the coronavirus COVID-19, and a sharp cut in oil prices (thanks to a Saudi Arabia led price war) which kicked off on March 9.

Firstly, some good news: Verve is one of the only superannuation funds in Australia that does not invest in fossil fuels, so our members have been shielded from the worst of the Australian and global share market price drops and volatility in recent days – including in the oil sector. 

When the share prices of the top 200 companies listed on the Australian Securities Exchange (ASX) dropped by a collective 7.3% on Monday, we weren’t invested in any of the top 10 affected companies. And when the Qantas share price dropped significantly this week to be down 40% compared to the start of 2020, Verve wasn’t invested in it either (in fact we aren’t exposed to any airlines because of their high carbon emissions). 

Verve is not invested in any of the top 10 companies that experienced losses on Monday the 9th of March 

Source: https://au.finance.yahoo.com/losers/

Yet, we are in a period where virtually every sector of the financial market is experiencing both turbulence and losses as uncertainty about the impacts of COVID-19 continues. As a result, Verve Super has also been affected.

This moment is uncomfortable. But our Investment Managers are calm and well prepared. Our portfolio is well structured. And smart decisions they made to hold back new investments in equities (i.e. company shares) as the news of COVID-19 was unfolding last month, means we are positioned well to use that cash to invest into equities again when the markets start to stabilise and growth opportunities emerge.

And despite news headlines painting the current situation as a “Share Market Meltdown” and an “ASX Bloodbath”, our Chief Investment Officer, with thirty five years of superannuation investment experience, has seen it all before. This is a bad time for the markets, but it’s not unprecedented. 

At this time, I cannot stress enough that as a superannuation fund we invest your super to build wealth over the long term as you work towards retirement. Long term investment does carry risk, but as a team we have confidence that in time the markets will rebound, as they have always done. In the meantime, we will continue to make considered investment decisions. Even through this period, we are continuing to seek out and invest in solid opportunities for our members, focusing on productive sustainable assets and long-term assets with predictable cash flows. 

As an example, as I speak, our Investment Managers are today evaluating an investment in a social housing initiative in Australia that is expected to provide a steady cash-flow to the fund. This is just one example of the kinds of investment opportunity that we will continue to search out for our members, which aren’t as exposed to the share market volatility experienced by large listed companies

There’s one graph that always gives me a lot of perspective in share market moments like this. Since the 1900s Australian shares have climbed an average of 11.8% per annum, that’s been despite two world wars, the Vietnam war, the Spanish flu, September 11, the dot.com bust, and the GFC. 

Australian shares have summited a slippery slope over the past 200 years:

Source: ASX, AMP Capital

If you are feeling anxious or worried about your superannuation or other investments, then let me assure you that how you are feeling is completely natural. 

That is why I’d like to open a dialogue: to ensure that you feel informed and supported to ask any questions you have, and to build a better understanding of how this moment fits into the longer term trends of the market.

On Monday the 16th of March at 8.30pm I will be hosting a live Q&A in Verve’s Facebook Group to answer any other questions you have. 

We’re in this together. If you have any questions, you can reach me at C.Hobbs@VerveSuper.com.au. Drop me a line with any suggestions, or just to check-in.

Glossary

Australian Securities Exchange (ASX) – The Australian Securities Exchange (ASX, sometimes referred to outside Australia as the Sydney Stock Exchange) is Australia’s s largest stock market. This is where anyone can buy shares in a listed company.

Equities – An equity investment is money that is invested in a company by purchasing shares in that company on the stock market.

Financial Markets – Financial Markets refer to a marketplace where creation and trading of financial assets, such as shares in a company, take place. This includes the Australian Securities Exchange.

High Volatility – Simply put, volatility is a reflection of the degree to which price moves. A stock with a price that fluctuates wildly, hits new highs and lows, or moves erratically is considered highly volatile.

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