Understanding the market volatility due to Coronavirus

Updated 8 April, 2020

Woman working from home
Woman working from home

Understanding market's volatility due to Coronavirus


Global share markets have fallen significantly since February, which have impacted most super balances. However, for those invested in our default Core Strategy option, shares are only part of your super. Core Strategy is a diversified option that also has investments in property, infrastructure, cash and bonds. It’s designed to minimise the impact of shocks to the share markets, like this pandemic. 
 

What is happening in the market?

Following a long period of continued growth and new record highs, the Australian and global share markets are reacting to international concern around the coronavirus. The virus has been found in over a hundred countries, and it’s still not clear when or how the virus will be contained.

The economic impact of the coronavirus remains uncertain. Many analysts have concerns about global and Australian growth slowing because of the coronavirus. Most global share markets have fallen from recent highs and have been highly volatile, and some commodity prices and currencies have also moved significantly.

 

What does this mean for your super?

When you first join Rest Super or Rest Corporate, your super is automatically invested in the Core Strategy - unless you tell us otherwise. Members can also choose from a number of investment options to suit their personal investment horizons and attitude towards risk.

The Core Strategy is a balanced fund, with a mix of growth and defensive assets. It has a long term horizon (10+ years), and if markets fall then in the short-term then balances can reduce during this time. Over 20 years for example, we estimate 3-4 years will have negative returns. If you’re invested in the Core Strategy or other options with growth assets, you may have noticed your super balance has fallen in recent weeks.

Since the Core Strategy started in 1988, the average annual return has been 8.57%^, despite including periods of major market falls like the dot-com crash (2000) and the global financial crisis (2008). We actively manage how we invest in various assets to respond to risks and opportunities. But past returns cannot provide an assurance of future performance and if you’re concerned about your situation and want to review your investment strategy and options, you may wish to seek financial advice.

 

Rest’s investment approach – Core Strategy

In recent years, at Rest we’ve noticed heightened risks in global markets. These global risk factors include historically low interest rates combined with high levels of debt. Risky markets are more vulnerable to ‘shock’ events which trigger major market falls or volatility. Following our assessment of these risks we strategically reduced share market risk in the Core Strategy:

  • The Core Strategy currently has a 38%^ allocation to the overseas and Australian shares asset classes - a lower allocation compared with recent years.
  • We also currently have 12%^ of the fund in ‘cash’, a more defensive asset class. Holding cash also means we have funds available to purchase shares or assets at attractive prices after markets fall, so members can benefit more when markets start rising again.
  • The Core Strategy’s other investments include property (e.g. office buildings), infrastructure (e.g. ports, wind farms), and other assets not listed on the share market. These are a mix of growth and defensive assets which balance the investment risk in the fund.

We could not have forecast the coronavirus, but it’s the kind of unforeseen event we were concerned about.
 

What if I’m still worried?

If you are still worried here are a few steps to think about:

  1. Understand your options – Have a look at our Rest Investment Guide to find out more about your investment options.
  2. Find out where you are invested - Log into MemberAccess or Rest App to see where your super is invested.
  3. Try our ‘Investment choice’ tool – Check your investment risk profile with our self-service online tool, to see what option may be right for you.
  4. Still need help?Chat online from 8.00am to 10.00pm weekdays, 9am to 6pm on Saturdays, and 10am to 6pm on Sundays (AEST), or call us.
Alert

We are hearing reports that our members are receiving unsolicited phone calls from us about their super. These are fraudulent. Rest will never call you to ask for your personal or financial information or to request a payment.

If you think you’ve been targeted by someone who is trying to access your super early, report it to:

EarlyReleaseofSuperTeam@ ato.gov.au

While you're here may also want to check out the below info

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Coronavirus and the role of insurance - Learn about what's covered and how to make a claim
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Coronavirus and your business - If you're an Employer, find out how Rest is supporting you and your employees