Skip to Content


A message from our Chief Investment Officer

April 2020

Dear Advisers and Investors,

As we have been communicating with you, these are difficult days for the world, its communities and its economies. The coronavirus is a rolling health crisis that has shut down normal life and put whole sectors into hibernation, while providing opportunities for a scarce few.

Over the past few weeks, share markets have fallen hard, interspersed with days where we’ve seen strong rallies. As professional investors managing the retirement savings of millions of Australians, we continue to be highly cautious and will not be drawn into short-term, emotionally driven market movements.

Our team at MLC brings to this current global event valuable experience and expertise gained from managing multi-asset and multi-manager portfolios since 1985. Our team’s combined knowledge and skill is being actioned to seek to cushion investors’ portfolios from the full impact of market turbulence, and to position them for the market recovery that should eventuate, in time.

Defensively positioned coming into the current period

We were defensively positioned coming into this pandemic. Strong share market returns over most of the post-GFC decade, and the particularly large market rise of 2019, caused us to think that future returns were likely to be lower. This coupled with valuations that had been elevated across many risk assets, made us cautious about how we positioned portfolios.

While we didn’t necessarily anticipate a market shock of this size and scale, we thought it sensible to put some protection in place, in anticipation of a potential correction. While it would be virtually impossible for any portfolio with a share allocation to come through the current period untouched, these positions have helped to provide some cushioning from the worst of the market upheaval.

Our actions on your behalf during market turbulence

In sporting parlance, we’ve been playing both “defence” and “offence”.

On the defensive side — the derivatives-based, risk-management strategies developed and managed by our in-house investment team coming into this year, have helped cushion MLC multi-asset portfolios from the worst of market falls. These strategies are providing a level of cost-effective protection.

Being underweight Australian shares has also helped provide some resilience for the portfolios.

Our overweight foreign currency position has also been helpful in dampening the effects of volatility. The AUD usually weakens in flight from risk environments, and this period is no different. At the time of writing, the AUD had fallen to close to 62 cents to the USD, again emphasising the AUD’s tendency to weaken when global share markets are volatile.

Investors migrate to ‘safe haven’ currencies, such as the USD and Yen, in times like these, and our decision to maintain our overweight foreign currency exposure has proven timely.

On the offensive side — we’ve been taking measured steps to buy quality assets using managers that have a firm eye on downside risks.

Above all else, we continue to hold fast to principles of diversification across asset classes, investment styles and philosophies, and investment managers that have served MLC’s clients for over 35 years through many market cycles.

The value of unlisted assets is also adjusting

Valuation changes are being experienced across a wide range of asset classes, including unlisted assets. In recent years in our MySuper portfolios we have been carefully and selectively increasing the exposure to unlisted growth assets, namely real estate, private equity (investments in privately owned businesses, rather than companies listed on stock exchanges like BHP or Apple), and infrastructure.

Unlisted assets have benefited from strong institutional investor support, leading to rising valuations.

Rather than paying any price to own such assets, we’ve been patient and disciplined. We’ve only bought assets when confident that the prices can be justified by the prospect of superior long-term risk-adjusted returns.

It’s clear that some of the unlisted assets included in portfolios have fallen in value and it’s prudent to adjust their values so investors are treated fairly, which we have done.

Opportunities will emerge

The COVID-19 pandemic is a dramatic example of a “Black Swan” event. Arguably, it’s the most destructive economic event since WWII.

Notwithstanding actions already taken by central banks and governments to support economic activity, and the likelihood of more to come, the return of a positive economic pulse may be delayed further than markets are currently expecting.

As we move forward in this environment, let me share some of the focus areas we watch with a keen eye:

  • The daily number of new reported infections: A plateauing of new cases would typically be a data point to foster market recovery.

  • Funding markets and credit markets: Healthy funding and credit markets are associated with well-functioning financial markets. By contrast, deterioration could signal deeper and more protracted market dislocations.

  • Consumer demand: the demand side of economic activity is being severely impacted by ‘social distancing’ globally and locally, as well as restrictions to travel and other activities. A turnaround will be needed to kick-start advanced economies, such as Australia’s, which rely on consumer spending to power more than 60% of Gross Domestic Product.

We are also in constant communication with global investment managers to gain perspectives not possible through an 'Australia-only’ lens.

Good assets invariably become over-sold in market tremors and this creates the opportunity for us to buy, on clients’ behalf, quality assets that can participate in the recovery that will eventually come.

We have already identified assets that are now cheaper than they were just a few weeks ago. We continue watchfully acquire such assets and, by doing so, set investors up for long-term success.

In this environment as in all market cycles, we are humbled by the opportunity to manage the savings and investments of so many Australians and their families, and will continue our open communication with you throughout this crisis and beyond.


Warm regards,

Jonathan Armitage
Chief Investment Officer, MLC Asset Management

Important information

This information is provided by NULIS Nominees (Australia) Limited (ABN 80 008 515 633, AFSL 236465) as trustee of the MLC MasterKey and Fundamentals Super and Pension and MLC MasterKey Business Super products which are a part of the MLC Super Fund (ABN 70 732 426 024 (together “MLC” or “we”). We are members of the National Australia Bank Limited (ABN 12 004 044 4397, AFSL 230 686) (NAB) group of companies. An investment in any product offered by a member company of the NAB group of companies does not represent a deposit with or a liability of the NAB or its subsidiaries. NAB does not guarantee or otherwise accept any liability in respect of any financial product referred to in this communication.

This information may constitute general advice. It has been prepared without taking account of an investor’s objectives, financial situation or needs and because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial situation and needs.

Investors should obtain a Product Disclosure Statement or other disclosure document relating to any financial product which is issued by MLC, and consider it before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available upon request by phoning our call centre on 132 652 or on our website at

Any opinions expressed in this presentation constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this communication is correct and that any estimates, opinions or conclusions are reasonably held or made at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this communication.