March investment performance update: Economic recovery fuels growth in member returns

Fuelled by the prospects of economic recovery in Australia and overseas, share markets continued to rise in the three months to 31 March 2021 (March quarter). This is helping to grow member balances in both accumulation and retirement phases.

Members in the Balanced option (Super and TTR Income) received a return of 3.22% in the March quarter, 13.48% for the period 1 July 2020 to 31 March 2021 (financial year to date) and 21.95% for the 12 months to 31 March 2021.

The 21.95% return over 12 months to 31 March 2021 shows the strength of recovery in asset prices.  The Balanced option has recovered from the market downturn in 2020 and provided long-term returns of 9.06% per annum over 10 years.

Balanced option performance (Super and TTR Income) as at 31 March 2021
The bar chart shows the percentage returns of the Super and TTR Income Balanced option as at 31 March 2021:  3.22% return for the March quarter, 13.48% for the financial year, 21.95% for the twelve months to 31 March 2021, 9.77% per annum for 5 years and 9.06% per annum for 10 years. 

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

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.

The returns in the Choice Income Balanced option have been similarly strong – with a return of 3.49% in the March quarter, 14.74% for the financial year to date and 24.31% for the 12 months to 31 March 2021.

 

Balanced option performance (Choice Income) as at 31 March 2021

The bar chart shows the percentage returns of the Choice Income Balanced option as at 31 March 2021.  3.49% return for the March quarter, 14.47% for the Financial Year to date, 24.31% for the twelve months to 31 March 2021, 10.65% per annum for 5 years and 10.01% per annum for 10 years.

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

 

The performance of key asset classes

The response of each asset class to recent economic conditions has varied.


Australian and international shares

In Australia, significant levels of government spending and low interest rates have helped to lift business and consumer confidence, and strengthen the labour market. 

Collectively, these factors have helped boost the value of Australian shares, especially in the banking and telecommunications sectors.

International share market values have also benefited from the economic recovery and the roll-out of COVID-19 vaccines, translating to strong returns in the March quarter and the nine months to 31 March 2021. 

Unlisted assets

Both Infrastructure and Private Equity assets performed well in the March quarter.  As the economy improves, infrastructure assets continue to have good prospects to increase their valuations, especially among toll roads, sea ports and renewable energy assets.

Like Infrastructure, Private Equity performance has also been supported by strong valuations and the economic recovery. With prospects of favourable long-term returns, the Fund is looking to increase the allocation to Private Equity assets in the portfolio, as opportunities emerge.

Property assets continued to face the lingering effects of the COVID downturn with reduced mobility affecting retail assets and changing working habits impacting office properties. Demand for quality office space is expected to rise as tenants demand A-grade facilities and attractive work environments.

Fixed interest and cash

In contrast to other asset classes, returns for the Cash option and cash investments in the March quarter have been minimal.  This is a direct result of Australia’s low interest rates.  While the Reserve Bank of Australia maintains low rate levels, returns in this asset class are likely to remain supressed and can be negative after fees.

For global fixed interest markets, the economic recovery does lead to higher long-term interest rates for bonds. This results in lower returns for fixed interest in the short-term due to lower bond prices when interest rates increase.

READ MORE: UNDERSTANDING THE CASH INVESTMENT OPTION

 

Looking ahead

While the pathway to global economic recovery remains uncertain, there are several factors that may support continued economic growth in Australia and overseas, including:

  • The roll-out of vaccinations across the world;
  • The commitment of the Australian government and overseas governments to stimulus programs;
  • Favourable monetary policies like low interest rates. Central banks are expected to continue monitoring employment and inflation levels before making changes to interest rates;
  • Improvements in consumer activity, which are expected to drive corporate earnings, supporting valuations for growth assets;
  • The strengthening of business confidence in Australia and overseas.

Guided by prospects of economic improvement, we’ve adopted a pro-growth investment view for the portfolio.

 

How we’re growing and protecting your super

The pro-growth investment view determines how we allocate asset classes in the portfolio. The asset allocation of the Balanced option at the end of March 2021 quarter is as follows:

  • The portfolio holds a higher allocation to growth assets, like listed shares and private equity;
  • The allocation to Australian and international shares is supported by expectations for stronger economic growth;
  • The portfolio has a higher exposure to infrastructure and reduced exposure to property investments. Strong balance sheets, improving economic conditions and increasing government investment provide a favourable outlook for infrastructure assets, while property investments are impacted by the effects of COVID-19;
  • The allocation to fixed interest investments is lower, due to lower expected returns, however fixed interest and cash allocations help to diversify portfolio risk by protecting against potential downturns in growth assets;
  • We now have a reduced allocation to foreign currency, as prospects of favourable economic activity provide support for a strong Australian dollar.

 

Balanced option asset allocation position as at 31 March 2021


Footnote:
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.

Economies, investment markets, and government policies are rarely static. Our team of 175 investments professionals continually monitor and adjust the portfolio on your behalf, to grow and protect your super over the long term.

 

Grow your super faster

Investment performance is just one way to grow your super.  There are many other things you can do to save for your retirement, including salary sacrifice, after-tax contributions and spouse contributions.  The more you add, the better your chance of achieving financial freedom in retirement.

Investing in your future today could make a big difference, and AustralianSuper has developed many useful resources to help you understand how adding to your super now could help your retirement in the long run.

 

CALCULATE YOUR PROJECTED SUPER

 

We're here to help

If you’d like more information on how to grow your super or manage your retirement plans, you can contact the AustralianSuper team. For personal advice, explore the advice options available to you on our website today.

EXPLORE: YOUR ADVICE OPTIONS

 

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. 



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