QIC goes synthetic
Big Queensland institutional investor QIC has initiated a new investment strategy that it believes will protect it from inflationary spikes.
The strategy involves using synthetic securities to provide what it describes as a “more flexible and tailored approach” to mitigate the impact of inflation on investment portfolios.
QIC managing director of active management Susan Buckley said the new strategy had been formulated on the basis of recently having disproved previously held views on hedging against inflation.
“Many investors have previously believed that equities represent a hedge against inflation, yet recent research goes against this thinking,” she said. “The latest research actually shows that traditional assets such as bonds, equities and property are actually not correlated with inflation spikes over short to medium-term periods. Inflation swaps and commodities provide the best hedge against inflation spikes.”
Buckley said the traditional approach for hedging inflation risk was to use inflation-linked bonds, but there were some significant factors that impact on their effectiveness.
She said rather than using physical assets, QIC had implemented the strategy using synthetic securities.
AUTHOR
Mike Taylor
Recommended for you
Adviser Ratings’ latest financial landscape report finds there is a demographic of advice practices achieving an average revenue of $5 million, with only 3 per cent of practices overall seeing a revenue decline.
The FAAA is calling for regulators to take a partnership approach with financial advisers regarding incoming legislation, rather than treating the industry as “guinea pigs”.
There have been strong numbers of returning advisers this year so far, according to Wealth Data, already surpassing the same period for 2024.
Less than one-third of Australian business owners have an ongoing advice relationship, according to NAB Private Wealth, highlighting an unmet opportunity for the advice profession to target.
