September quarterly update – encouraging returns for members

Global investment markets have continued to recover over the past 3 months up to 30 September 2020, helping to deliver encouraging returns for members.

Members in the Balanced option (super) have benefited from a 3.12% return in the September quarter (01 July 2020 – 30 September 2020) and members in Balanced option for Choice Income – a 3.38% return in the same period.

Over the long-term the PreMixed options continue to deliver competitive performance. The High Growth, Balanced, Conservative Balanced and Stable investment options have been top performing funds over 10 years, each ranking 1st in their peer group in the SuperRatings Crediting Rate Survey, 31 August 2020.

Super and TTR Income investment option performance as at 30 September 2020
The chart shows AustralianSuper’s Super and TTR Income investment option performance as at 30 September 2020, The returns for the 3 month period were at 3.12%, 1 year at 1.39%, 5 years at 8.44%, 10 years at 8.64%, 15 years at 7.09% and 20 years at 7.37%.

Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. Returns from equivalent options of the ARF and STA super funds are used in calculating return for periods that begin before 1 July 2006.

For TTR Income accounts, the investment return is based on the crediting rate for super (accumulation) options. From 1 April 2020 the crediting rate includes an administration fee that is deducted from investment returns, that only applies to super (accumulation) accounts and does not apply to TTR Income accounts. TTR Income accounts will be adjusted to refund the administration fee deducted from investment returns, so that it does not apply.

Choice Income investment option performance as at 30 September 2020
AustralianSuper’s Choice Income investment option performance as at 30 September 2020. The returns for the 3 month period were at 3.38%, 1 year at 1.45%, 5 years at 9.13% and 10 years at 9.60%.

Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

The benefits of staying invested through market ups and downs

The recent recovery in investment markets, after the declines experienced in February and March this year, has highlighted the benefits of staying invested in a diversified portfolio, throughout market ups and downs.

The hypothetical examples below show the difference between staying invested in the Balanced option compared to switching to Cash during the March 2020 market downturn. Each of the members, Helen, David and Peter invested in the Balanced option starting from 30 September 2019.

  • Helen had $100,000 invested in the Balanced option on 30 September 2019. She stayed invested in this option throughout the market downturn. The value of her account on 30 September 2020 was $101,387 – representing an increase of 1.39% for the year.
  • David switched his $100,000 investment in the Balanced option to the Cash option on 18 March, when the government introduced restrictions. David’s account has a value of $90,924 on 30 September 2020, leaving him $10,463 worse off.
  • The results are even lower for Peter who made the switch on 23 March, at the lowest point in the downturn. Peter’s account had a value of $87,111 on 30 September 2020 - down $14,276.
Comparing Balanced vs. Cash option investment scenarios

Balance and cash option investment scenarios
Value of a $100,000 investment from 30 September 2019 to 30 September 2020

Comparison of the Balanced option versus Cash option investment scenarios based on a $100,000 investment across 12 months covering 30 September 2019 to 30 September 2020. A member who stayed invested in the Balanced option would have $101,387 on 30 September 2020, compared to $90,924 if they had switched to the Cash option on 18 March 2020, and $87,111 if they had switched to the Cash option on 23 March 2020.

The above hypothetical examples are provided for illustrative purposes. Consider your personal circumstances before making investment decisions. Doesn’t include administration, insurance and other fees and costs that are deducted from account balances. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

We understand that the Cash option can provide members with stability of returns and can help with short-term cash flow needs. It’s important to note that investing in cash at the current low yields means that your returns may not be above inflation over the long-term. This could mean, that if you stay invested in cash for an extended period of time, your super may not grow to meet your retirement income needs.

FIND OUT MORE: Economic impacts on Cash option returns

 

While the speed of the downturn in February and March this year took members by surprise, the speed of the recovery was equally surprising. Seeing your super balance drop during times of market volatility, can be unsettling. However, it’s very challenging to profit from switching investments to time market downturns and recoveries. Trying to perform these switches may result in losing value in your super.

READ MORE: POTENTIAL RISKS OF SWITCHING INVESTMENT OPTIONS

 

The outlook for investment markets and your super

Although on-going concerns about Coronavirus around the world and the uncertainty of the US election could result in short-term market volatility, we’re expecting the economic recovery to benefit returns in your super over the medium to longer term.

We’re expecting governments to continue supporting economic recovery with stimulus programs and low interest rates. These conditions favour investments in growth assets and are likely to provide opportunities in private equity and infrastructure investments. With continued low interest rates, returns on fixed interest investments are destined to remain low. The low yield environment also reduces returns for cash investments which will struggle to keep up with inflation.

In line with our recovery outlook, the Investment team have now positioned the PreMixed options for growth. Here are some of the changes we’ve made to the Balanced option:

  • The portfolio has a higher level of exposure to growth assets such as listed shares and private equity and a lower exposure to defensive assets such as fixed interest and cash.
  • We’ve allocated a higher weight to infrastructure assets. We’re expecting these assets to benefit from significant government investment as well as strong returns compared to other asset classes.
  • A lower weight has been given to property assets given the challenges faced in the retail sector with the growth of online shopping.
  • We’ve also increased the exposure to credit assets as we’re seeing opportunities for beneficial returns in this asset class as the economy improves.
  • Our allocation to foreign currency has been reduced, while increasing exposure to the Australian dollar which is expected to benefit from the economic recovery.
Balanced option asset allocation position as at 30 September 2020
A pie-chart of the Balanced option asset allocation position as at 30 September 2020: Australian shares at 22.2%, International shares at 34.7%, Private equity at 3.9%, Listed property at 0%, Direct property at 6.3%, Infrastructure at 12.4%, Credit at 4.3%, Fixed interest at 8.7%, Cash at 6.9% and other assets at 0.6%. The allocation to foreign currency has also been reduced to 19%.

The Trustee may alter the asset allocation or the composition of individual asset classes from time to time to suit prevailing market circumstances. Due to the Fund's different cashflow management approaches for Superannuation and Choice Income accounts, there may be a slight difference in the asset allocations for these options at any given time.

Focussing on the long-term

As always, to get the most out of your super it’s important to stay focused on the long-term, and not be distracted by the ups and downs of investment markets. Market volatility is a normal part of investing and, as we’ve just witnessed, markets can rebound very quickly after a downturn.

READ MORE: INVESTMENT MARKET CYCLES – HOW THEY WORK AND WHAT THEY MEAN FOR YOUR SUPER

 

AustralianSuper is by your side with help and guidance

If you switched investment options during the downturn and are unsure about what to do or if you have any other questions about your super, it might pay to speak to one of our experienced financial advisers. An adviser can help you make the right choices for your financial needs and circumstances.

 

SPEAK TO A FINANCIAL ADVISER TODAY

 


This information is general financial advice which doesn’t take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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