David Koch: Most people would have no idea what they're invested in.
Damien Webb: I think it is, it is a common thing about what is it? People know super, they like the concept of super, but they're still not quite sure exactly what's invested and how it works and why does it go up and down? And then, you know, what are the various things that I should be doing about it?
David Koch: Hello and welcome to In the Hammock, the podcast and video series designed to support you and your super, with Brighter Super experts helping you to build confidence on your path to your brighter retirement. We're here to make super and retirement feel a whole lot simpler. I'm David Koch, and today we're talking about something a lot of people admit they don't really understand where their super is actually invested. Most Australians know their balance, but ask them whether their super is in shares, property, bonds, or cash, and things go a little quiet. Joining me is Damien Webb, the Chief Investment Officer of Brighter Super. Damien, good to see you. Thanks for joining us.
Damien Webb: Hello Kochie.
David Koch: Tell us a bit about yourself.
Damien Webb: I've recently joined Brighter Super. I'm responsible for the investment function and how the portfolio is invested and the returns that we deliver for our members. And before that, I've had about 30 years, you know, working all the time in funds management, managing portfolios for clients and members across all asset classes, which we're going to talk about a bit later. Yeah. I've had some experience in London as well, worked in London in the last few years. So that is me in a nutshell and I'm very happy to be here.
David Koch: Looking forward to chatting further.
Damien Webb: We’re going to tuck into some, some really interesting conversations around what it is we're invested in, but we will get into some investment concept and it's important that we'll cover off that this is general advice. This is not specific to individuals' needs and requirements. So, if you do want to know more, you must consider your own circumstances and potentially go get some advice as well.
David Koch: Let's set the ground rules. The very basic.
Damien Webb: Yeah.
David Koch: Because people will see words like shares.
Damien Webb: Yes.
David Koch: Infrastructure.
Damien Webb: Yes.
David Koch: Fixed interest, and they'll see them all on the pie graphs.
Damien Webb: Yeah.
David Koch: What do they actually mean?
Damien Webb: I try and keep it simple. And I can give you some examples as well, because I think sometimes, you know, examples bring it to life. But there are some attributes which I think are worth talking about, right? And I, I sort of break into two basic groups. You've got your defensive assets, and you've got sort of your growing assets. And typically, the growing assets are, are a bit more volatile. Volatile is what we call risk. So it moves up and down a little bit more. And so over time, as you get more of the riskier or higher growth assets, they tend to move around a little bit more, are more risky. But ultimately, if we try and just break that down a touch further, under the defensive banner, we're all comfortable with a cash in bank, right? You give them, say, $100 for a year, they'll give you $100 back and you might get $5 along the way. You know, those are low volatility. The price doesn't really change. But you invest in those things for an interest rate. And those can be, it's considered as a, a very stable, low risk investment. As you then move out onto the spectrum, there's things like shares. And most Aussies are pretty comfortable with shares. You know, we've got Telstra, we've got Commonwealth Bank, you know, they're all these big privatisations. They sort of know those things. But that's really what we're talking about shares. They're a part of a company, typically listed on an exchange like the All Ordinaries. And ultimately you're buying in the future earnings potential of that company. So, you're saying, right, CBA, great bank, is making a profit. It gives me a dividend, but ultimately what I'm really there for, I'm there for the share price appreciation over the long term. But on that journey, it will go up and down and you get that volatility or that risk. And there's a bunch of other asset classes in between, which we can talk about.
David Koch: Same thing with international shares, but listed on international exchanges, things like Microsoft.
Damien Webb: I think, yes, international shares are exactly the same thing. The only difference there is you then get, let’s get a bit technical for a moment, you then have currency over the top of that. Ultimately, the currency that you buy the shares in overseas, if it's in America, it's US dollars, that also will have an impact in the performance of that. It's not just a share price.
David Koch: Okay. So also, in the pie graphs you get in the statement, there's property. What sort of property does it invest in?
Damien Webb: I think property is one thing that, that most people know pretty well. Most Australians when they look at their balance sheet as they're getting a bit older, they've got two things. They've got a home and they've got their superannuation or some of them do anyway. The home is typically, we call it residential, so it's a residential sector. We have the benefit of being able to invest in other forms of property. We might be able to invest or buy an office building or a shopping centre. Increasingly there's more things around things like industrial logistics parks. For example, Amazon's up here, you know, you buy your stuff on Amazon. They've got to store your goods in a warehouse somewhere. We will own that shed and they'll pay us a rent. Then rent goes through to our members.
David Koch: Okay. And, and infrastructure.
Damien Webb: Yes.
David Koch: What does that mean?
Damien Webb: Yeah look, infrastructure, again, it's a, it's a relatively newish asset class compared to shares that have been around for hundreds of years. But ultimately, it's a share ownership in a significant piece of infrastructure. Infrastructure we define as an essential service, or a monopoly style asset like an airport or a bridge or increasingly things like industrial energy, like solar farms or wind farms, those sorts of things. So, you can own a share in those enterprises, and they're also really good investments to have.
David Koch: So, when you look at your statement and you see all of those portfolios, domestic shares, international shares, infrastructure, property - basically you own as a superannuation member a little bit of all of those. And that's the diversification form.
Damien Webb: That's right. And again, just to bring it to life, another good one is for infrastructure, Sunshine Coast Airport. We've bought into that. We own a stake of that, and that's just one example. Own a little bit of, you know, Commonwealth Bank, just to bring it to life.
David Koch: And why is diversification important in the portfolio?
Damien Webb: That's this concept whereby you can put a number of assets together, but you reduce the overall risk or, or variability of that portfolio. Ultimately, combining assets that behave differently, you know, what's happening with Sunshine Coast Airport will be different to what drives the share price of Commonwealth Bank to a degree will be different to what happens with our term deposit with a bank. They all behave differently. You combine them together, you get a good return from the three investments, but the overall return you get and the variability of that will lower as you combine them together.
David Koch: Right. So, when one's doing it tough and down the performance of the fund gets smooth because other parts of the fund are doing well. And that's a whole reason.
Damien Webb: And one of the areas we do a little bit in, is agriculture. And so again, you know, what is happening with, say, Microsoft versus a farm you might have out near Toowoomba that's growing something or producing something, very different. They're going to be impacted by two entirely different things. You've got this diversified portfolio that shares the burden of the ups and downs.
David Koch: You touched on a little bit earlier about the risk profiles. Let's go through that and the differences between, say, conservative, balanced, and growth and high growth.
Damien Webb: We have a lot of terms and nomenclature, names in our industry. I think ultimately what we're trying to do as Brighter Super is offer a range of options, like a menu. You go into a restaurant, you have a menu. We offer you a menu of things you can do. If you want to, you can go into individual sector options, like you can get a share option or the cash option, those sorts of things. Or we think we're relatively informed in putting portfolios together. We've got a good team internally. We've got some great advisors. We'll say, "Listen, if you're not quite sure what you want to do with that, we can also put a premixed option together for you." Almost like a bit of degustation menu, you know, if you will. We'll say, "If you're not quite sure, we'll pick some things for you." But what is really critical at that point in time is we do need to know, and it's important for the member to be in the right option. So, for example, going back to those two food groups of the defensive asset classes and the growth asset classes, one's lower risk, one's higher risk. If you are in a lower risk option, you'll have a higher weight into cash, bonds, and those more stable investments. If you are in a high-risk option, you'll have more of the international shares, the Australian shares, those sorts of things. It is really important you're in the right option depending on where you are in your life. You know, if you are young and working, in your 20s, you should want a high return generally.
David Koch: Why?
Damien Webb: You know? Well, because over time it's been proven. Despite the volatility and the variability, and I've gone through quite a number of crises as I'm sure you have, whether it's a tech bubble or the GFC, the Global Financial Crisis, markets tend to recover and grow over time once you zoom out. Asset classes like shares that are exposed to growth in the economy tend to do well and better, and give a higher rate of return than lower-risk investments.
David Koch: Okay. All right. So, there's no right or wrong answer in terms of your risk profile, is there? Because you've got to be comfortable with it yourself.
Damien Webb: Yeah, it's probably worthwhile talking about a few case studies, right? And again, you and I have shared some conversations in the past where members are in an option, for example, and there might be some variability. You know, the market, like Liberation Day, last year with...
David Koch: Market crashes and all that sort of thing. Yep.
Damien Webb: So, if you are young, you have more ability to wear the variability in markets, but ultimately grow. And that greater risk for you is making sure that you don't have too little risk in the portfolio, or too little opportunity in the portfolio. Equally, as you are approaching retirement, you also want to make sure that you've got the right mix of assets as well. The variability isn't too high either, because as you transition from working to retirement, it's important you've got transparency of what you're going to have to live on for that period of time.
David Koch: So, it's a different thought process in your 40s and 50s to what it is in your 20s and 30s.
Damien Webb: I think so. And this is again where we're getting to that area where advice is really, really important. What we do is provide a series of premixed options from lower risk to higher risk. It's important that you're in the right option at the right time. Equally, as you're approaching retirement, it's really important. You might still have 20 or 30 years, God willing, hopefully a great retirement and the opportunity to do some amazing things. So, you don't want to de-risk the portfolio too soon either. Again, that level of making sure you're in the right option with the right profile that's right for you is really, really important.
David Koch: Right. And going too conservative too early can have a big impact as well, can't it? On your retirement lifestyle in the future.
Damien Webb: Again, you know, what we see around the world, particularly in Australia, it's a great place to be. People are living longer, you know? And I think you want to approach retirement with confidence and have, you know, and know what you can do with your money and, you know, with your family and all those sorts of wonderful things. It is important that, you know, have the right level of growth because if you're still investing for 20 to 30 years you know, you want to make sure you've got some things in there which are going to produce those returns, which you need to, as well as the income to live off in that period of time.
David Koch: It can be scary for a lot of people approaching retirement, particularly when they see headlines around the world saying market crashed trillions of dollars wiped off share market. It's quite easy to think to yourself and say, "I don't want any of that hassle. I'm going to cash because it's going to take the worry away." History tells us that that's probably one of the worst things you can do.
Damien Webb: Yeah, it is. It can be a really challenging time. Some examples, you know, case in point, we saw with Liberation Day, which was an incredible level of volatility. So, the tariffs were announced, the markets fell really, really deeply. If at that point in time we'd said, "Oh, this is scary. I'm going to move out of my high growth or balanced growth option or shares and move to cash." We saw then within a couple of weeks that it had unwound, and the market had recovered and is now well above where it was before. And so, there's quite a risk of making what is a paper loss, or your share price moving around, a real loss if you transfer to cash and then miss out on the recovery. That is a concern and members need to be really aware of that, of not being seen to overreact. But that all comes back down to your plan and making sure you're in the right option to begin with and you're at the right timeframe to work through these variations.
David Koch: So how often should you look at your options, your investment options, and also then your risk profile? Is it a matter that you've got to have a regular checkup on it? What do you recommend? What's a good pattern to get into?
Damien Webb: It's important to look at these things regularly. You really want to normalise these conversations. If you’ve got a partner or, you know, have those regular chats. It doesn't have to be scary, but make sure you know what you're in. Make sure you've got clarity around the communications.
David Koch: That's sort of the first step. It sounds simple, but understand what you're in. When you get your next super statement, don't just look at the first page. Go to the other pages that follow that give you all the detail.
Damien Webb: Yeah. And, I think look, we have people who can answer phone calls. And again, this is just generally, but I think it's important to understand the information you can get. Try and make sure you understand it. And if not, call up and ask, you know? A lot of effort goes into making sure we provide people who can have good conversations around that. And again, then you can go and get advice. So, number one, check it regularly. I don't think you need to overcheck it though. I think, you know, watching it three or four times today is probably too much. And with unit prices, sometimes you can get into that game.
David Koch: Yeah, yeah. It becomes addictive, doesn't it?
Damien Webb: It does, you know. Whereas I, but I think, you know, a regular health check, just like you'd take care of yourself, you know, go and make sure that everything's working regularly for yourself. Same thing with your finances and with your superannuation, you know, checking on regular basis that works for you. But I think certainly there's lots of tools and channels available for members, with Brighter Super in particular, to call up, have a chat and understand what they're in and whether it’s right.
David Koch: Because you got to have a life. And it's your job to look after the investment returns, isn't it?
Damien Webb: That's right.
David Koch: The worst thing I think people can do is second guess their investment manager because that's what you are paid to do.
Speaker 2 (14:30): It is.
David Koch: Time to actually think about and worry for us so we don't need to do it.
Damien Webb: That's right. We have a large team of professional investors in-house that is looking at this every day, so you don't have to. You know, and we've got a lot of global advisors who can help us and navigate various markets. We've got some wonderful investment managers to buy and sell things for us as well. So, there's quite a large team, a huge global team on your side inside Brighter Super and externally that have managed this and we're doing the worry for you so that ideally you can live your life.
David Koch: Yeah. What are the biggest mistakes you see people make when it comes to their super investments?
Damien Webb: It's making sure that they are in the right option is probably the main thing. And understanding the option you're in is the main one. Also, not overreacting to events is really important. So that switching conversation we had, you know, moving to cash at the wrong point in time. Those are the really important ones. Just taking some of the fear out of it, you know? Get comfortable with what you're invested in and inquire about it. Have a curious mindset towards it. We have lots of information to share with you and are keen to really demystify it for you and help you on that journey. That's our goal.
David Koch: So, it is a complex area for people to get their head around. What do you want people to take away from our conversation today? Steps that they should be taking now?
Damien Webb: The main thing is an acknowledgement, a calling out, that it is a relatively complex area. You know, most people have got busy lives, they've got other things they can do with their time. And more than anything else, they probably look at this and go, "Oh, I'm not quite sure." The main thing to take away is some comfort that it is professionally managed, and it is really cared for. The employees at Brighter Super and the board really care about making sure we do the right thing by the members. So, we're aligned there. The other thing to take out of it is to get involved, to get curious and to understand what you're invested in. And if unsure, try out some of our tools on our website or give us a call and understand what's going on.
David Koch: Take an interest. Put the effort into understanding your own risk profile. Time of life. That can make you sleep better at night, can't it?
Damien Webb: Correct. Yes.
David Koch: Damien, great to catch up.
Damien Webb: Thank you, David.
David Koch: Thanks for joining us. And thanks to you for joining us for In the Hammock. If you've found this helpful, share it with someone who probably has no idea where their super is invested. Make sure to follow or subscribe to watch future episodes or listen to future episodes and keep building your confidence on your path to a brighter retirement. Thanks for joining us.
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