Weekend edition: Steady Hand, Shifting Sands
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Why is the global investment landscape described as a “poly‑crisis” and how does it affect super‑fund strategy?
A big unexpected energy crisis. Central banks now having to shift direction as inflation starts to kick back in again. Europe no longer the safe bet as a rebalancing strategy against the United States. And AI going from strength to strength, but will it deliver? And for whom? Uh lots of questions there right now for investors. Let's see how Mercer's chief investment officer is tackling those challenges. The morning call from NAB with Bill Dobby. The weekend edition. Well, this year Donald Trump has been uh big on foreign policy. Okay, he didn't take Greenland, uh, but he did strike at Venezuela, and of course we are in the midst of this war with Iran, and we know uh the profound impact that is having on global energy markets.
So how do you manage your way through that when you are one of the biggest super funds in Australia? Well, Kylie Willman is Mercer's chief investment officer for the Pacific region, spin on at least once or twice, I think. On the podcast before. Last time we spoke, Kylie, it was early twenty twenty five, after a good year for growth. You'd seen fourteen percent return through investors on the year before. You're expecting growth to continue but not quite so fast. So let's catch up. What was twenty twenty five like and how is this year looking? Does all this uncertainty and all this volatility that we've been seeing does that work on your side or does it make life a bit harder?
Yeah, look, Phil, I think you're right to describe it as a time of global uncertainty. And one of the things that we do is we partner with the World Economic Forum every year and we produce uh with them a global risk report and this year the description that w we landed on as part of that report was that the world's in a time of poly crisis and that sounds you know, dramatic, but it's really I'm trying to point at the fact that there are lots of things happening at once. Of course, we've got the military. conflicts, we've had trade wars, we've had the AI uh evolution, revolution. Um we've got the backdrop of course of extreme weather events and and climate change. So Um, you know, it it brings a lot of noise to what we're thinking about um every day.
And there can there can be, I think, a temptation to react to the noise or the latest headline or perhaps, you know, de-risk out of out of the fear and uncertainty. But, you know, we also know that markets can continue to do well through times of change and uncertainty. And even, you know, those times that you were referring to through twenty five and twenty four, there was certainly plenty of geopolitical um uncertainty and uh things going on through those times as as well. But yet we've seen uh volatility for sure, but uh returns continue to to hold up really well. So sitting here we've had the the averaged balance fund or a typical diversified fund has generated double digit returns for the last uh three years up until the end of last year, despite, you know, I think all of the uncertainty
and turmoil. And even this year as we're sitting here, you know, pushing into the end of April, yes, we've had volatility and uncertainty, uh, particularly linked to the outbreak of the war. in Iran and the knock on implications into to oil markets. Um, but you're sitting probably about flat for an average balance line year to year to year to date, again, despite all of that um uncertainty.
How does Mercer’s core long‑term strategy stay sound while making “adjustments at the margin” for today’s volatility?
So um Yeah, I mean I think for me it's often about the strategy that you have in place over the long term and before you get to a crisis period that's the secret to success rather than having um too many knee-jerk reactions in in the moment. Um and for us, you know, we're not really changing the long term strategy that we've we've got, um, but we're probably holding to it a little bit more if that makes sense. So
Well, yeah, because it is it is it does feel like a case. What was that movie, Everything Everywhere All At Once? Uh it feels like we're in the midst of of all of that. And yet, yes, I can see that you get gr you can still get growth if you're s if you're smart, so long as there's growth happening in the world.
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Chapters
8 chapters
1
Why is the global investment landscape described as a “poly‑crisis” and how does it affect super‑fund strategy?
0:01–3:39
2
How does Mercer’s core long‑term strategy stay sound while making “adjustments at the margin” for today’s volatility?
3:39–7:47
3
What risks does a potential stagflation scenario pose for Australian super‑funds and how are they being managed?
7:47–12:25
4
Why are private‑market assets, real assets and infrastructure becoming larger parts of the portfolio?
12:25–16:22
5
How does the fund balance foreign‑currency exposure when the Aussie dollar swings between 60c and 80c?
16:22–20:01
6
What role do AI and the energy transition play in future investment opportunities and risk?
20:01–24:12
7
How is geographic diversification (US, Europe, Asia) being used to reduce concentration risk?
24:12–27:39
8
What is the outlook for double‑digit returns in 2026 and how should investors set expectations?
27:39–30:11