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Managing volatile equity markets

Published on 23 Feb 2022

Prime Super’s CEO, Lachlan Baird, explains how the fund manages market fluctuations.

Domestic and international equity markets are, once again, volatile, but managing market volatility is fundamental to the responsible management of your super.

Prime Super’s investment portfolio is structured to deliver strong, long-term returns, while managing short-term risks.

What causes market volatility?

Short term returns reflect current issues and concerns. These include uncertainty around COVID-19, domestic and international economic recovery, along with international political tensions.

The short-term returns of investment markets can move quickly in both directions (up and down). Initially they can reflect over-corrections for any pessimistic or optimistic views on current issues. 

However, in time, these over-corrections are moderated as the issues of concern develop or disappear, and the real direction of market prices evolves. 

How do we respond?

Prime Super does not chase short term returns. We invest carefully and strive for sustained, above average returns for all our investment options over the medium to long term.

All our investment options, including the Australian and International Shares options, balance risk and return. The aim is to deliver strong returns over the long-term, without taking excessive risk.

Risk vs return

We manage a portfolio that has a mix of growth assets for higher returns (e.g. shares) and defensive assets for more predictable returns (e.g. cash).  To get a good long term return some risk has to be taken.

If we take no risk, then the return will be a cash return which is close to 0% right now.  It is, therefore, reasonable to see some negative returns in the short term as share markets fluctuate over the short term.

By investing in both value stocks (those shares that are relatively cheap based on the earnings they deliver) and growth stocks (those shares that will potentially see significant growth in the business prospects) we are able to have a level of risk mitigation within the portfolio.

Our active investment approach

As an active investment manager, the investments team at Prime Super is constantly monitoring the markets in terms of both returns, yields and future expectations.

Remember that superannuation is a long-term investment. Our portfolio is managed in a way that delivers strong long-term returns, while managing short term risks.

What do we deliver?

Our disciplined and methodical investment process has meant that we have a proven track record as a strong performer over the long term. Many of our investment options consistently rate in the top quartile when compared to other super funds.*

Our administration fees are in the bottom third of all super funds when considered on a per member basis.

Prime Super is an independent, profit-to-members super fund. Our robust investment strategy is designed to ride out short term market fluctuations and deliver long term results.

*SuperRatings Fund Crediting Rate Survey - Balanced (60-76) June 2021. Please note, past performance is not a reliable indicator of future performance.