top of page

The role of equities in your superannuation portfolio

Updated: Jun 4, 2024

Capital protection plus capital growth are the twin goals many of us have for our super. Here's how an actively managed share fund can achieve both.


Equities have a lot to offer as an investment to grow retirement savings. Long term capital growth plus ongoing dividend income is a combination that makes shares a favourite among self-managed super funds (SMSFs) and retail investors.


Fortunately, there are several ways to gain exposure to shares.



Options include holding shares directly, investing via an exchange traded fund (ETF) or by purchasing units in an unlisted actively managed fund.


These choices are not mutually exclusive. Investors can opt for a combination of all three.


However, an actively managed fund can offer important advantages.


Active management calls for discipline - and plenty of research


Research shows that retail investors often mistime their entry into and out of share markets. Volatility can be a major factor here. Investors tend to buy when markets are booming (and share values are high), and bail out when markets dip and values fall.


ETFs can help investors avoid this issue. The downside is that most ETFs are index funds that simply mirror the market. This keeps fund fees low though it comes at the cost of returns that match the market at best, rather than outpace it.


An actively managed share fund brings an additional factor to the table - discipline. Investment guru Warren Buffett is credited with saying investors should be fearful when others are greedy, and be greedy when others are fearful.


In other words, the winning strategy is to buy when markets are down, and sell when prices are high.


It is the discipline to stick with this approach that allows experienced, active fund managers to deliver above-market returns.


The Chester High Conviction Fund is a great example of this outperformance.


As the table below shows, over the long term Australian shares have delivered average annual returns of about 8% though returns can be far more volatile over the short term.


The Chester High Conviction Fund has far-outpaced the market, achieving returns after fees of averaging around 14% annually.

When it comes to saving for retirement, this 6% outperformance can make a tremendous difference to an investor's wealth by the time they are ready to hang up their work boots.


Investing in transformative companies


How is the Chester High Conviction Fund able to deliver higher returns than, say, ETFs? The answer is simple.


Unlike most ETFs, which track a given benchmark, we do not hold stocks that make up the benchmark.


Let me explain.


The Aussie share market, and market indices, are dominated by a few big names.


Our biggest listed companies may be favourites among direct retail investors, but their sheer scale makes it hard for these corporates to generate returns above 7% annually.


As a fund manager for over 20 years, experience has taught me that to consistently achieve returns in the low teens, a portfolio needs to concentrate on smaller and medium-sized listed companies - what we call the small- and mid-caps.


These are the companies with the agility to transform as our economy transforms. It calls for a long term focus, but this matches the investment horizon for superannuation savings.


The upshot is that the Chester High Conviction Fund looks for the high performers among the small- and mid-caps within the S&P/ASX 300 Accumulation Index.


Finding those unloved, underappreciated or undiscovered stocks calls for plenty of research: It's not called a 'high conviction' fund for nothing.


But the fund isn't just about high returns.


Clever strategies to grow and protect capital


The Chester High Conviction Fund has a mandate to grow and protect investors' capital.


These are exactly the twin goals that so many of us look for in our superannuation portfolio. And we achieve them through a clever strategy.


Around 6-8% of the fund's portfolio is invested in cash and gold.


Holding cash allows the fund to buy attractively-priced stocks when they become available. That's the growth component.


The appeal of gold is that it has very low correlation to other asset classes. Price movements are relatively independent. In this way, gold can reduce overall volatility and provide the element of capital protection.


A fund that lives up to its promise


The Chester High Conviction Fund team has worked together for over a decade. Our combined expertise really shows up in the fund returns.


For investors who are looking to grow generational wealth while preserving capital, the fund lives up to its promise. It can make a valuable difference to the value of your nest egg when you're ready to exit the workforce.

Opmerkingen


Melbourne (Head Office) 

Level 47, 80 Collins Street (North Tower)
Melbourne VIC 3000

Sydney
Governor Macquarie Tower
Level 25, 1 Farrer Place,

Sydney NSW 2000

Brisbane

Suite 24, Level 18, 324 Queen Street, Brisbane QLD 4000

DISCLAIMER

 

This website provides information to help investors and their advisers assess the merits of investing in financial products. We strongly advise investors and their advisers to read information memoranda and product disclosure statements carefully.

The information on this website does not constitute personal advice and does not take into account your investment objectives, financial situation or needs. It is therefore important that if you are considering investing in any financial products and services referred to on this website, you determine whether the relevant investment is suitable for your needs, objectives and financial circumstances. You should also consider seeking independent financial advice, particularly on taxation, retirement planning and investment risk tolerance before making an investment decision.

Neither Copia Investment Partners Limited, nor any of our associates, guarantee or underwrite the success of any investments, the achievement of investment objectives, the repayment of capital or payment of particular rates of return on investments.

Copia Investment Partners Limited publishes information on the website that to the best of its knowledge is current at the time and is not liable for any direct or indirect losses attributable to omissions from the website, information being out of date, inaccurate, incomplete or deficient in any other way. Investors and their advisers should make their own enquiries before making investment decisions.

*Ratings

The rating issued September 2022 APIR OPS0001AU, September 2022 APIR OPS0002AU, September 2022 APIR OPS0004AU, October 2022 APIR OPS1827AU, October 2022 APIR OPS7755AU, October 2022 APIR OPS8304AU & September 2022 APIR OPS2991AU are published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only,and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2022 Lonsec. All rights reserved.

The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned APIR OPS2991AU June 2022, APIR OPS4597AU September 2022, APIR OPS8304AU September 2022, APIR OPS7755AU June 2022, APIR OPS0002AU October 2022, APIR OPS0004AU October 2022, APIR OPS1827AU June 2022) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual, including target markets of financial products, where applicable, and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at http://www.zenithpartners.com.au/RegulatoryGuidelines

© 2023 Copia Investment Partners Limited

bottom of page