An update on financial markets

What's going on in financial markets?

Sharemarkets around the world have fallen sharply over the last week amid growing investor fears about a slowing global economy and Europe's ongoing debt crisis. The Australian market has not been immune and we have also experienced significant losses. Some market commentators have signalled that the United States economy may be heading for a double-dip recession, and these comments alone have created momentum towards the market losses. Even after a second major rescue package for Greece and the recent agreement to raise the debt ceiling in the United States, investors are concerned that world leaders have not done enough to address fragile underlying economic growth, while Europe's debt problems have now moved onto the much bigger economies of Italy and Spain.

What does this mean for your super?

Intrust Super and our investment managers are closely monitoring the situation across all markets. The environment has been challenging, but we remain confident in our investment strategy and risk management processes.

In particular:

• Intrust Super's Balanced investment option is highly diversified with a healthy exposure to bonds and cash, helping to minimise any impacts on our members' investments.
• Our unhedged exposure to global equities has also helped to cushion returns, with the Australian dollar declining by a similar amount to sharemarket falls, thereby reducing the impact of losses from falling sharemarkets.
• Our risk policies limit us to only dealing with highly regarded institutions, and we also spread the risk between these institutions to ensure risk is not confined to any single manager.

While it may be tempting to move your money into less risky options such as cash during times of high market volatility, most experts advise against this. Historically, the strongest market bounce backs have occurred following periods of significant downturns. By selling your shares and moving your super into cash when the market is down, you'll be turning that loss that you currently have 'on paper' into a real loss and will likely miss out on significant gains when the market recovers. If you're thinking about switching investment options, we strongly recommend you talk to a financial adviser before doing so.

What's the outlook for the future?

Due to prevailing uncertainty in the global economy, we expect to see continuing market volatility in the near future. While Australia is not immune to global events, we are one of the few developed markets that are well positioned to withstand market weakness.

At Intrust Super, we take a long-term approach to managing our members' superannuation. While the markets are challenging, there are also many opportunities, and our focus is on managing the short-term risks while leveraging any longer term opportunities to benefit our members.

For more information, you can call us on 132 467 or, if you would like advice on your specific situation, you can contact our team of financial advisers at Intrust360° here.