Like most professional investors, Statewide Super chief investment officer Con Michalakis didn’t see Brexit or President-elect Donald Trump coming. At the outset of 2017, he is focused on ensuring the portfolio can withstand whatever shocks the new year has in store.
Michalakis is a finalist for the Conexus Financial Superannuation Awards 2017 Chief Investment Officer of the Year. Throughout January, Investment Magazine will feature Q&As with all the finalists for the awards.
Here, he reflects on the biggest shocks of 2016 and how he is positioning the $6.9 billion Adelaide-based industry superannuation fund to meet its return targets in 2017.
IM: What was the biggest challenge you faced in 2016?
CM: We’ve had five years of top-quartile performance for most investment options, based on SuperRatings surveys. Our biggest challenge in 2016 was maintaining this good performance in the face of unexpected shocks such as Brexit and President-elect Trump.
Neither of these shocks were factored in at the start of the year. If anything, last January and February were about low commodity prices, low oil prices and China. By the end of the year, we’d had a complete reversal, with both strong markets and a growing global economy.
You have to build portfolios and adapt to these changing conditions.
What proved to be your best call in 2016?
We bought Australian shares early in the year when the ASX 200 Index was trading in the low 5000s. (By year’s end, it was at 5665 points and in early January it pushed through 5800).
Another good call was selling some fixed interest just after Brexit and adding some more value-style management in our global equities portfolios.
These moves have all worked out better than we thought, which resulted in good performance for the second half of 2016.
What do you expect to be your biggest challenge in 2017?
I believe the biggest challenge will be to manage the expectations of investors and stakeholders, as we are anticipating a world with lower returns and greater volatility. Having said that, we will be working hard in 2017 to maintain competitive performance for our members.
The winners of the Conexus Financial Superannuation Awards 2017 will be unveiled at a black-tie event at the Ivy, Sydney, on March 9, supported by Vanguard and AIA Australia. You can purchase single tickets or tables for 10 by visiting the event website. The Conexus Financial Superannuation Awards proudly support The Wayside Chapel.