The behind-the-scenes investments supporting your super on a smooth ride
If you’re invested in any of our pre-mixed investment options, you’re invested in the alternatives portfolio. These are made up of the absolute return and thematic opportunities asset classes. Each plays a unique defensive role, but together help build portfolios that are resilient, diversified, and better able to handle shifts in the economic environment.
Why alternatives matter in a diversified portfolio
Alternatives aren’t designed to protect the portfolio from every market downturn, but they can add resilience because they don’t typically move in the same direction as shares or bonds. That means:
- they may rise when other markets fall
- with some similarities to fixed interest and cash, alternatives may provide stability when markets are volatile
- they can tap into long-term global trends that aren’t captured elsewhere in the portfolio.
Absolute return aims to steady you through the market ups and downs
Absolute return strategies are designed to deliver steadier returns regardless of whether shares and fixed interest markets are rising or falling. These strategies are usually less affected by interest rate movements, making them a useful alternative to traditional fixed income, which can experience negative returns when interest rates rise.
Returns are generated by investing in specialised strategies that respond to different types of risks, including some that are not linked to traditional financial markets. However, while these strategies may respond differently to market risks, it’s important to remember that they are not risk-free and negative returns are still possible. Some examples of strategies include:
Insurance-linked investments earn coupon income from insurers in exchange for covering certain losses from pre-determined insured events. The frequency and severity of these events is unrelated to share prices, so if share markets fall, investment values don’t necessarily move with them.
Short duration credit strategies aim to provide steady income, with the potential for additional returns through active credit selection. As investments are typically shorter term, they are less sensitive to changes in interest rates, which can reduce the impact on investment values when interest rates are rising.
Global macro and fixed income specialist strategies aim to generate returns by identifying mispriced securities across fixed income and currency markets. They typically make money regardless of whether markets are rising and falling, which can help protect investment values during periods of volatility.
In simple terms, absolute return strategies aim to act like a stabiliser for your super, helping to smooth out returns over time.
Thematic opportunities aim to benefit from themes shaping global markets
While absolute return focuses on stability through different market conditions, thematic opportunities look to long-term global themes and the major shifts shaping the world. These strategies can offer defensive characteristics in certain environments and look beyond daily market movements, aiming to benefit from structural trends across the global economy that can influence markets over years. This is a newer part of the portfolio with a lower allocation that’s being gradually and thoughtfully built over time. Here’s a closer look at what you might find inside.Commodities can include resources like energy, metals (such as gold) and agricultural products. We invest in commodities because they often shine through when:
- inflation is high
- markets are volatile
- investors look for assets that tend to hold their value over time.
CareSuper’s thematic opportunities asset class has, over time, included exposure to gold futures, designed to behave similarly to physical gold over the medium to long term. This has supported returns in periods where traditional markets have been bumpy.
Trend-following strategies are designed to make the most of strong market movements whether prices are rising or falling. These strategies benefit from trends in markets globally across multiple asset classes. Trend-following strategies have historically performed well during difficult periods for traditional markets, helping to support our goal of delivering a smooth ride to members.
Global macro strategies take positions across currencies, bonds, equities and commodities based on economic and policy shifts around the world. They are flexible and can adapt quickly, helping to generate returns in various market conditions.
These strategies help thematic opportunities deliver diversification and capture returns from global changes that may not be reflected in traditional assets.
The benefits to your super
Alternatives play an essential role in building a robust and balanced portfolio, and offer benefits that include:
- Aiming to reduce risk through better diversification: Because these investments typically behave differently from other assets, they can help protect the portfolio from volatility during market downturns.
- Capturing opportunities that traditional assets may not: Themes like inflation, currency shifts and commodity trends aren’t always reflected in other markets.
- Contributing to stronger long-term outcomes: By adding a wider range of return sources, the portfolio is better positioned to handle changing economic cycles.
By blending different sources of return with thoughtful risk management, alternatives help steady the ups and downs of investing. They add depth and resilience to the portfolio, so your super has a smoother ride and remains focused on delivering stronger outcomes for your retirement over the long term.
Disclaimers
This is general information only and doesn’t take into account your objectives, financial situation or needs. Before making a decision about CareSuper, you should consider if this information is right for you.
Past performance isn’t a reliable indicator of future performance. The value of investments can rise or fall, and investment returns can be positive or negative.