A Canberra-based superannuation fund for federal government employees reportedly turned a $70 million profit after shorting the Mexican peso before Donald Trump’s surprise election, according to The Australian.
While the Commonwealth Superannuation Corporation has not confirmed the figure, it said in a note to members: “CSC pro-actively managed your superannuation portfolio with the use of diversification and hedging strategies implemented prior to the events unfolding.”
Last financial year the fund, which manages $38 billion worth of public servant nest eggs, recorded a net return of between 1.7 and 1.9% for its balanced default fund options.
The Mexican peso plunged 13% when Trump was elected — its biggest fall since 1994.
The currency became something of a gauge of Trump’s prospects in the weeks leading up to the November 8 vote because of the negative impact his proposed tightening of US trade and immigration with Mexico could have on that economy.
Whenever it looked like Trump’s chances of winning improved, the peso weakened against the dollar — and vice versa.
Here’s the note the CSC super fund’s chief investment officer, Alison Tarditi, wrote to members post-election:
The US election result in favour of the Republican party led to strong financial market reactions, not only in the US but across the world.Whenever there is financial market volatility such as this, we understand that you may have questions about what this means for your superannuation investments.
The Brexit announcement in June this year saw similar short-term market volatility, however following that event the markets corrected relatively quickly.
CSC recognises that short-term financial volatility typically results through periods of heightened uncertainty. Through both of these recent episodes, CSC pro-actively managed your superannuation portfolio with the use of diversification and hedging strategies implemented prior to the events unfolding. These strategies operate like insurance policies against the potential for events like this – events that may not eventuate but, should they occur, could destabilise markets and negatively impact on your investments.
However, the ultimate direction of financial markets will be determined by the fundamentals that support or hinder economic activity – CSC remains focused on these fundamental drivers of investment returns.
In this way, we continue to look through the “noise” and find ways to position your superannuation portfolios primarily from a medium-term perspective, to achieve your objectives in retirement with prudence and careful fundamental analysis.