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WELCOME Philip Kewin, AFA Chief Executive Officer
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Today’s webinar • 1 Hour CPD available – AFA will send details within the next week.
• As a webinar attendee you are on ‘mute’ during the webinar
• Questions will be answered at the end of Brian’s presentation. Please use the Zoom QA function (not the Chat function) to ask your question.
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Sunsuper investment update
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Main messagesGlobal
• Steep global recession in H1 2020 before gradual, drawn-out, uneven recovery
• (Underlying fundamentals weren’t too bad going into this!)
• Monetary and fiscal policy responses have been aggressive, but there may be more to do (particularly by governments)
Australia
• Deep recession H1 2020 before recovery – sharp spike to double-digit unemployment rates
• Government has more work to do to boost growth, and measures to date may not work fast enough (money to flow too slowly)
Markets, strategy
• Crises inevitably create opportunity
• Shares now VERY attractive vs bonds, cash – DAA process has increased shares exposure
• Still seeking to take advantage of opportunities in alternative strategies and unlisted assets..
• ..subject to ensuring the fund continues to meet our members need for liquidity5
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COVID-19 in perspective
Pandemic Estimated deaths
Sixth Cholera Pandemic (1910-11) 800,000 +
Spanish Flu (1918) 20 – 50 million
Asian Flu (1956-58) 2 million
Hong Kong Flu (1968) >1 million
HIV/AIDS 36 million
Swine flu (2009) 200,000
Sources: Centres for Disease Control and Prevention (US), www.mphonline.com
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Collapse in sentiment steeper and faster than the GFC
7
Source: Sunsuper, Refinitiv. *Equally weighted deviations from moving average, for VIX index, AUD, US and European High-Yield bonds, EM vs DM equity performance, Treasury bill-Eurodollar (TED) spread and S&P500 high vol vs low vol stocks. Last observation is 22nd April 2020.
-6
-5
-4
-3
-2
-1
0
1
2
3
May-99 May-02 May-05 May-08 May-11 May-14 May-17 May-20
Z-scores*
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Impact on China worse than GFC
8Source: Refinitiv. Last observation is March 2020
25
30
35
40
45
50
55
60
65
Jan-05 Jan-08 Jan-11 Jan-14 Jan-17 Jan-20
China: NBS Purchasing Managing Indices
Manufacturing Non-manufacturing
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Collapse in business conditions
9Source: Refinitiv. Last observation is March 2020
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Australia: confidence has collapsed
Source: ANZ, Roy Morgan Research
50
60
70
80
90
100
110
120
130
140 ANZ-Roy Morgan Consumer Confidence Index
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30 NAB Business confidence - Net balance (%)
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Australia: labour market numbers will be very ugly
Source: Refinitiv, Sunsuper *April data assume no change in labour force from March.
0.3
0.8
1.3
1.8
2.33
3.5
4
4.5
5
5.5
6
6.5
7
7.5
Aug-99 Aug-02 Aug-05 Aug-08 Aug-11 Aug-14 Aug-17 Aug-20
Weaker jobs ads pointing to sharply higher unemployment?
Unemployment rate - lhs
ANZ Job ads as % of labour force - rhs inverted*
% %
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What factors will determine success in an uneven global recovery? (an abbreviated list!)
Macro policy response –
magnitude and implementation
Depth of the decline in GDP and
employment
Infection control success (and risk of
resurgence)
Trade linkages Labour market flexibility Financial stability
Exposure to high risk industries
12
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Governments are (mostly) stepping up, but more will be needed
13Source: UBS, Sunsuper. *Change in the cyclically adjusted primary budget balance in 2020.
0
2
4
6
8
10
12 Fiscal thrust* as % of GDP (positive reading indicates expansionary policy)
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Fiscal stimulus in the age of COVID-19:a very different approach to the GFC
14Source: UBS, IMF
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COVID-19 economic impact: exposure to higher risk industries
15Sources: ANZ, Sunsuper. *Portion of the economy in higher risk industries: Manufacturing, Wholesale & Retail trade, Accommodation & Food, and Arts & Recreation – relative to 15 country average.
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2 Z-score*
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16
Just how defensive are alternative assetslikely to be? The GFC experience
-80
-70
-60
-50
-40
-30
-20
-10
0Maximum drawdown* during GFC
Sources: Sunsuper, Refinitiv. Data for alternative asset classes: Sunsuper portfolio performance. Data for public markets: Australian REITs - S&P/ASX300 A-REIT Accumulation Index; Global REITs - FTSE/EPRA NAREIT Index hedged into A$; Australian shares - S&P/ASX300 Accumulation Index; International shares -MSCI World Indices. *Dates for drawdown calculations vary between asset classes.
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Main messagesGlobal
• Steep global recession in H1 2020 before gradual, drawn-out, uneven recovery
• (Underlying fundamentals weren’t too bad going into this!)
• Monetary and fiscal policy responses have been aggressive, but there may be more to do (particularly by governments)
Australia
• Deep recession H1 2020 before recovery – sharp spike to double-digit unemployment rates
• Government has more work to do to boost growth, and measures to date may not work fast enough (money to flow too slowly)
Markets, strategy
• Crises inevitably create opportunity
• Shares now VERY attractive vs bonds, cash – DAA process has increased shares exposure
• Still seeking to take advantage of opportunities in alternative strategies and unlisted assets..
• ..subject to ensuring the fund continues to meet our members need for liquidity17
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Access to webinar content• Today’s webinar recording, presentation slides and a CPD
assessment quiz will be uploaded to afa.asn.au
• All registrants will receive an email confirming when available
• Get in touch at [email protected] if you have any questions
Thank you for joining us today