In this latest update, we look at the Fund’s recent investment performance for the period ending 31 December 2020. We also hear from Chief Investment Officer Mark Delaney. Mark shares his outlook for investment markets in 2021, and what this could mean for your super.
AustralianSuper members have received strong investment returns over the last quarter. Watch the video below and hear an update from Chief Investment Officer Mark Delaney.
Investment performance update with Chief Investment Officer Mark Delaney
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Show transcript
Hello everyone, Happy New Year, and welcome to our latest performance update.
When we reflect on the events of 2020, the COVID pandemic was a one in a 100-year event that impacted the way we live and work.
This brought about one of the sharpest and deepest recessions on record, and some sharemarkets fell by more than 30%. Markets rebounded quickly after the falls. Since the 23rd of March 2020, Australian shares have risen about 50%, finishing off the calendar year with positive returns.
Similar results occurred in international shares with many markets like the U.S. closing 2020 at all time highs. Investment markets continued to rise in the December quarter, helping to deliver strong quarterly returns for members in both accumulation and retirement accounts.
For members in accumulation, you'll be pleased to hear that each of the PreMixed options delivered positive returns over the quarter, financial, and calendar years. The Balanced option, where most members are invested, has returned 6.62% for the December quarter, and 9.94% since 30 June 2020. Even with this significant downturn in February and March, the return for the Balanced option was 5.49% over the past year and 8.96% per annum over the past 10 years.
Members in retirement have also benefited from strong returns, but the Balanced option returning 7.25% for December quarter, 2020, and 5.99% for the year to 31 December 2020. Importantly, when we look at the long-term, the Balanced option has delivered retirees a strong return of 9.91% per annum over the 10 years to 31 December 2020.
Investor confidence has gathered momentum with the rollout of a number of COVID vaccines around the world. The suppression of the COVID virus will help support continued economic recovery in 2021. As we move out of lockdowns, we're expecting pent up consumer demand, along with government stimulus programs and low-interest rates, to speed up economic recovery. These conditions may provide improved returns for growth assets, such as listed shares, as well as opportunities in private equity and infrastructure.
In contrast, lower returns are expected from cash and fixed interest investments due to the reduced level of interest rates. After the falls experienced in early 2020, the quick recovery in member balances has highlighted three important points. Firstly, members can trust our experience in navigating volatile markets. Secondly, history has again shown that markets recover after downturns. And finally, our data shows that members are better off when they stay invested in a diversified portfolio throughout the market ups and downs.
Maintaining long-term discipline increases the potential for long-term investment success. Thank you for your time today and being part of the AustralianSuper family. Stay safe, and remember, we're committed to helping you achieve
Looking back on investment markets in 2020
The COVID pandemic that unfolded in 2020, was a 1 in a 100-year global event. It affected the way that people live and work. This event brought about one of the fastest and deepest recessions on record. Investment markets responded quickly with some share markets falling by more than 30%.
As governments and central banks introduced programs such as JobKeeper and policies like low interest rates to support their economies, we saw a strong rebound in investment markets. Since the 23 of March 2020, Australian shares have risen about 50%, finishing the calendar year with positive returns. Similar results occurred in international shares, with many markets like the US, closing 2020 at all-time highs.
The chart below shows how both Australian and international shares reacted to the pandemic in early 2020, followed by the market recovery since late March 2020. Renewed investor optimism, due to promising vaccine news, has lifted share markets since November 2020.
Australian and international shares – Returns during 2020
Investment returns are not guaranteed. Past performance is not a reliable
indicator of future returns.
Sources:
1. FactSet using S&P/ASX 200
Index and MSCI All Country World ex Australia Index (in local currency)
2. Downturn: Australian shares from
20 February to 23 March, international shares from 19 February to 23 March
3. Rebound: Australian shares and
international shares from 23 March to 31 December
Rebounding markets drive strong member returns
As investment markets continued to rise in the December quarter, (01 October - 31 December 2020), they helped deliver strong returns for members in both accumulation and retirement accounts.
For members in accumulation
All AustralianSuper PreMixed options delivered positive returns over the December quarter, financial year to date (01 July 2020 – 31 December 2020) and the calendar year (2020). The Balanced option – where most members are invested - returned 6.62% for the December quarter and 9.94% since 1 July 2020.
It’s worth noting that even with the significant downturn in February/March 2020, the return of the Balanced option was 5.49% over the past year and 8.96% per annum over the past 10 years.
The PreMixed options continue to provide highly competitive performance, ranking among the top funds over the past 10 years4.
Super and Transition to Retirement Income investment option performance as at 31 December 2020
| Investment Option | 3 months | Financial year to date | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 8.03% | 11.93% | 6.59% | 9.69% | 9.67% |
| Balanced | 6.62% | 9.94% | 5.49% | 8.96% | 8.96% |
| Socially Aware | 6.66% | 9.54% | 3.03% | 7.64% | 8.61% |
| Indexed Diversified | 6.35% | 8.46% | 5.08% | 7.74% | |
| Conservative Balanced | 4.73% | 7.16% | 4.80% | 7.31%. | 7.68% |
| Stable | 2.76% | 4.25% | 3.49% | 5.85% | 6.34% |
| DIY Mix Options | |||||
| Australian Shares | 11.77% | 11.66% | 1.41% | 8.73% | 8.35% |
| International Shares | 6.23% | 12.91% | 15.47% | 12.57% | 12.45% |
| Property | -0.26% | 0.24% | -7.39% | 4.22% | 5.88% |
| Diversified Fixed Interest | 1.04% | 1.80% | 1.87% | 3.62% | 5.29% |
| Cash | 0.05% | 0.11% | 0.50% | 1.61% | 2.40% |
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.
For members with Choice Income accounts
The news is equally positive for members with Choice Income accounts. All PreMixed options delivered solid returns for the quarter, financial year to date and calendar year.
Choice Income members in the Balanced option benefited from a 7.25% return for the December 2020 quarter and 5.99% return for the calendar year.
Importantly, when we look at the long-term, the Balanced option for Choice Income accounts has delivered retirees a strong return of 9.91% per annum over 10 years to 31 December 2020. This is key, as being able to grow your super in retirement means you can rely on your savings for longer.
READ MORE: INVESTING IN RETIREMENT
Members who’ve chosen the Conservative Balanced option for their Choice Income accounts have received a 5.32% return for the December quarter and 5.49% return for the calendar year.
Choice Income investment option performance as at 31 December 2020
| Investment Option | 3 months | Financial year to date | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 8.81% | 13.03% | 7.29% | 10.60% | 10.62% |
| Balanced | 7.25% | 10.87% | 5.99% | 9.76% | 9.91% |
| Socially Aware | 7.43% | 10.61% | 3.58% | 8.57% | 9.53% |
| Indexed Diversified | 7.10% | 9.43% | 5.77% | 8.80% | |
| Conservative Balanced | 5.32% | 8.03% | 5.49% | 8.23% | 8.63% |
| Stable | 3.13% | 4.79% | 3.86% | 6.58% | 7.15% |
| DIY Mix Options | |||||
| Australian Shares | 12.75% | 12.65% | 2.52% | 9.78% | 9.51% |
| International Shares | 6.74% | 13.86% | 16.65% | 13.69% | 13.68% |
| Property | -0.20% | 0.32% | -7.18% | 4.96% | 6.77% |
| Diversified Fixed Interest | 1.32% | 2.18% | 2.40% | 4.27% | 6.14% |
| Cash | 0.07% | 0.16% | 0.65% | 1.92% | 2.82% |
Reflecting on recent member returns
While it’s challenging to see market volatility and negative news headlines. The rebound in markets following the falls in early 2020 has once again shown that markets have historically recovered from downturns.
More importantly, the recovery in member balances, has shown the value of a skilled and experienced investments team in navigating volatile markets and the importance of members staying on course with their long-term investment strategy.
AustralianSuper data clearly shows that members are better off when they stay invested in a diversified portfolio throughout market ups and downs. Maintaining a long-term view of super, increases the potential for investment success.
READ MORE: INVESTMENT MARKET CYCLES – HOW THEY WORK AND WHAT THEY MEAN FOR YOUR SUPER
Chief Investment Officer Mark Delaney’s outlook for investment markets in 2021
To help rebuild Australia’s economy, the Reserve Bank of Australia (RBA) has made it clear they will maintain low interest rates for some years. While low interest rates remain in place, the returns for cash investments are likely to remain low.
‘While the road to economic recovery may be bumpy at times, our outlook for investment markets in 2021 is generally positive,’ says Mark. ‘The rollout of several COVID vaccines around the world, continues to boost investor confidence and the suppression of the COVID virus will help support economic recovery here and overseas.’
As, or when, Australia moves out of lock-downs, we expect pent-up consumer demand, along with government stimulus programs and low interest rates to speed up economic recovery and improve returns for growth assets,’ shares Mark. ‘These conditions may also provide opportunities in private equity and infrastructure investments.’
‘Our positive outlook for growth assets is in contrast to the low returns expected from cash and fixed interest investments.’
READ MORE: UNDERSTANDING THE CASH INVESTMENT OPTION
Asset allocation - how our outlook for 2021 shapes the Balanced option
In line with our long-term market outlook, our investment team takes a pro-growth stance in the allocation of assets in the Balanced option. This means:
- We have a higher allocation to growth assets such as listed shares and private equity, and a lower allocation in cash and fixed interest investments, relative to the median balanced fund.
- Within Mid Risk assets, we continue to pursue opportunities in infrastructure, property and credit assets that are expected to deliver long-term growth for the portfolio.
- We’ve reduced the weight of foreign currency, as favourable economic activity and demand for Australian exports are expected to support the appreciation of the Australian dollar.
The chart below shows the proportion of each asset type in the Balanced option, at the end of December 2020.
Balanced option asset allocation as at 31 December 2020
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.
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1. FactSet using S&P/ASX 200 Index and MSCI All Country World ex Australia Index (in local currency)
2. Downturn: Australian shares from 20 February to 23 March, international shares from 19 February to 23 March
3. Rebound: Australian shares and international shares from 23 March to 31 December
4. SuperRatings Fund Crediting Rate Survey - SR50 Balanced (60-76) Index - 31 December 2020
This information may be 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.