As global markets evolve, investment strategies must adapt to the shifting landscape, with Rest positioning itself for long-term growth by aligning with the emerging forces that will define the next generation of market leaders.
In conversation with InvestorDaily, Kiran Singh, Rest’s interim co-chief investment officer, explained that to support its long-term thinking, the fund has identified five megatrends that it believes will impact society and markets more broadly.
“These megatrends are decarbonisation, deglobalisation, demographics, digitalisation and debt and central bank policy,” Singh said.
“On balance, we believe these megatrends will be inflationary, and we expect central banks will be required to run tighter monetary policy to keep inflation in check.”
These megatrends, as emphasised by the co-CIO, play a pivotal role in shaping Rest’s scenario modelling for future market expectations. The fund expects that, under these scenarios, investors will no longer benefit from uniform valuation increases across all assets and will instead need to adopt a more selective approach to achieve success.
“Risk management becomes more important, and you may not be able to rely on negative stock/bond correlations to diversify risk,” Singh said.
“We are therefore being selective and focusing on assets, across our whole portfolio, that we believe are well-positioned to benefit from the identified megatrends.”
According to Singh’s co-CIO, Simon Esposito, the fund has formulated an investment strategy that includes exposure to a broader range of diversifiers that have inflation-hedging characteristics.
This includes foreign currency, real assets such as infrastructure, in addition to natural assets, such as Rest’s investment in agriculture.
“The decarbonisation of the economy presents extraordinary opportunities to invest in assets that deliver over the long-term for our members – particularly the more than 1 million Rest members who will retire in a post-2050 world,” Esposito told InvestorDaily.
“The energy transition continues to provide interesting investment opportunities that align with our long-term member objectives.”
As such, the fund has made significant commitments to infrastructure assets that stand to support and benefit from decarbonisation, in addition to data centres and telecommunications networks that will underpin ongoing digitalisation.
This includes Rest signing on as a cornerstone investor in Fidelity International’s Fidelity Real Estate Logistics Climate Impact Fund last year, as well as its $1 billion commitment to renewable and clean energy infrastructure manager Quinbrook Infrastructure Partners in 2023.
“We also expect Australian and OECD industrial property to generate long-term growth in part due to deglobalisation and moves to diversify and onshore supply chains and we continue to consider opportunities for favourable financial outcomes in affordable housing projects,” Esposito said.
Moreover, Singh added that these megatrends will provide interesting investment opportunities in listed equities.
“For example, these could be quality companies that support the digital economy, or those with pricing power that are positioned to benefit from increasingly localised supply chains,” he said.
Rest saw its second consecutive calendar year of positive returns for its MySuper Growth investment option, returning 11.19 per cent in 2024.
Last month, the fund said this was underpinned by the continued strong performance of listed sharemarkets and international equities in particular.
Commenting on the results at the time, Singh agreed that global shares remained a standout performer over the year, especially in the US.
In fact, Singh said, with several central banks moving to ease monetary policy and markets responding positively, 2025 is set to benefit from these same tailwinds.
“Equity valuations are elevated but, for now, they are supported by continued economic resilience and earnings growth,” he said.
“Inflation is coming down in major developed economies and employment is generally softening. We expect central banks will continue to ease rates. We will watch policy uncertainty in the US closely, but we broadly expect outcomes to be market friendly.”
Singh, however, acknowledged the potential for upside surprises in inflation, warning that any shifts in inflation expectations could negatively affect rate trajectories.
“We firmly believe that being selective and focusing investment into assets with good fundamentals – strong balance sheets and stable and consistent earnings – are expected to support the continued generation of strong returns for members.”
