Mark Delaney: Hi,
Sandra Silea: To
start off, AustralianSuper has been a consistently top performing fund.
Mark Delaney: The
last 10 years have been really good.
The Balanced plan is at a 9.8% per annum, over the 10 year
period, and is number 1 ranked in most of the surveys, but the most important
thing about that is, it's really built members' retirement savings.
If a person had $50,000 invested in the Balanced plan 10
years ago, they'll now have over $126,000. It's an enormous amount of money
Now, how has that happened? It's happened because share
markets, and infrastructure and property markets have been very strong, so over
that period, it's been a very good time to be invested.
The irony being, there's a lot of worries during this period
after the financial crisis, and people were cautious.
Being overly cautious actually cost people money, in terms
of building their retirement savings, so we invested in those strong growth
assets, and the portfolio made a lot of money.
There seems to be a lot of negative news lately. The US, China trade conflict,
falling house prices in Australia, and stagnating global growth, yet share
markets keep reaching all-time highs.
What do you see at the major risk going forward, and how are
you managing them at AustralianSuper?
Mark Delaney: It's rare that the newspapers, well, the
financial press, reports positive news is the first point, so there's always
negative news, and there's always events, which are occurring over time.
Sometimes, this negative news results in the share markets
falling, and returns coming off, and sometimes it doesn't.
If you look at the current environment, I think that there's
more reasons to be a bit more concerned than what we've been historically.
This trade conflict is an issue, which they're working their
way through, but hard to see an easy resolution from it and central banks are
having to cut interest rates very early in the downturn in the cycle, and that
doesn't necessarily bode well for things in the longer-term.
Sandra Silea: So,
you've been investing for more than 3 decades now.
Mark Delaney: I
started really young.
That's right, and during that time, I'm certain you've seen your share of
market ups and downs.
What would you say to members who might be concerned about
their investment outlooks, particularly those who are currently in, or about to
Mark Delaney: 30
years is a long time to be invested, and I've seen things like the Japanese share
market crash, the great share market crash of 1987, the property market bust,
financial crisis, and they're terrifying at the time, but all these things now,
are just headlines to people who look back 20 years ago.
They're just headlines, and life moves on.
If you're investing for the long-term, you're going to have
events like this, because that's what life is, but the long-term smooths all
those things out, and you build long-term savings.
If you're close to retirement, you still require a long investment
horizon you can use. You might be 20, or 30 years on investment horizon.
That's a very long time, and a lot of those things will
accrue, and wash out over that period.
It's a good thing to keep in mind, obviously.
The pace of change in the world, over the last 10 years has
been staggering as well. You've remarked to some of those events as well. What
do you see as the major themes driving investment markets, going forward, and
what does that mean for investment outcomes?
Mark Delaney: The
major things that always drives investment outcomes is, where you are on the
At the bottom of the economic cycle, or things where the
news if very grim, is always the best time to invest, because those things pick
up for a long time.
When things are looking really good economically, and
unemployment's down very low, and things have improved a lot, is often a time
to be more cautious, because markets look forward and anticipate how things are
going to evolve.
At the current time, we're toward the end of an economic
cycle, so we need to keep that in mind.
There's also these structural things, which are taking
There's probably three structural elements.
The first one is, the interest rates are now, really low.
No one would believe interest rates in Australia are 1%. No
one would think that's normal, or realistic. In Europe, they're negative.
How can that be?
You have to pay the bank to take your money.
Think about that, pay the bank, to take your money, and so
low interest rates are one of the first big themes.
The second big theme is, we've had this world of
multilateral trading, whereby the supply chain between the US and China, and
China and Europe were heavily interdependent.
Now, with the trade dispute, they're all being unwound, and
we're moving to what I call a super-regional world, whereby China will have its
own block, the US will have its own block, and Europe will have its own block,
so no longer an overarching view of how the world is.
Companies who benefited from the previous regime of greater
global integration will maybe be penalised in the new world.
The third theme, which is different I think, is the fact
that governments are taking a much more active role in the world.
You can see the way they've taken place around financial
services, around trade, even now, around communication and technology
Governments are far more active in terms of setting policy,
and creating things.
That's a really, a step back from where they were with the
deregulations unit, which operated for much of the previous 30 years.
Going back to your first theme, and this low interest rate environment, what
does this mean for returns going forward, especially for members who like to
put their money in income-producing assets?
Mark Delaney: Oh,
that's challenging, that's challenging. It's challenging for anybody in that
We'd like to say you'd need to earn about inflation plus 4%
in the long run, to build a retirement savings.
Now that these fixed income returns are earning less than
inflation, that's going to be very hard to build a large retirement balance, so
you're going to have, to have money invested in investments other than fixed
income, to build retirement balances, so you'll have to have unlisted assets,
like property, or infrastructure, or even shares.
Well, it's good to diversify, and I guess that's the mantra of AustralianSuper,
Yeah. Diversification matters.
The purpose of diversification is really to smooth out the
volatility, the ups and downs of the markets.
The idea being that, when something goes up, another thing
may go down, and offset each other partially.
That idea of having a portfolio where we've got property,
and infrastructure, and bonds, and corporate debt, and shares, and overseas
shares, and technology stocks and whatever, gives a person a fairly big
exposure, without betting all on the one thing.
What does the next 10 years look like for AustralianSuper?
It's something we always wonder about, because investments is always about
looking out into the future, and wondering what it's going to be.
We're currently managing about $160, to $170 billion in
In 10 years' time, that could be a much larger sum, and so
we have to build investment capability, to be able to do that.
Two things we're really doing, the first one is, we're
moving to having a big ... a global footprint, as we have more money invested
The second thing we're doing is, to invest more in private
markets, and more in direct transaction, because we think they're going to
provide the opportunity to get extra returns, which are going to be hard to
find in this low interest rate environment.
That's fabulous. Thank you so much for your time, Mark.
Thank you, Sandra.