21 March 2022
Long-term returns remain competitive despite short-term impacts
A number of Australian and international conditions have challenged investment markets in the first three months of this year. The war in Ukraine, rising costs of living, rising interest rates and the continued effects of COVID-19, brought about considerable volatility in investment markets. This volatility affected the returns of most of the asset classes that members are invested in.
Below, we take a look at member returns for the three months to 31 March 2022. We also look at what’s ahead for investment markets and the steps we’re taking to protect and grow your super over the long-term.
Investment option performance*
In the short term, the performance of each of the PreMixed options was negative for the three months ending 31 March 2022, with positive performance for longer term periods. This includes the Balanced option, which delivered a return of -2.12% for the quarter and 2.75% for the financial year to date.
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 ranks among the top three funds in their peer group. (SuperRatings Crediting Rate Survey, 31 March 2022).
Super and TTR Income investment option performance as at 31 March 2022
| Investment Option | 3 months | FYTD | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | -2.65% | 2.75% | 10.20% | 10.07% | 10.93% |
| Balanced | -2.12% | 2.75% | 9.05% | 9.11% | 9.84% |
| Socially Aware | -3.17% | 2.16% | 8.73% | 7.64% | 9.18% |
| Indexed Diversified | -3.56% | 1.53% | 7.37% | 7.81% | 7.91% |
| Conservative Balanced | -2.12% | 1.38% | 5.85% | 6.90% | 7.97% |
| Stable | -1.69% | 0.43% | 3.15% | 5.02% | 6.11% |
| DIY Mix Options | |||||
| Australian Shares | 2.63% | 8.84% | 18.35% | 10.52% | 11.06% |
| International Shares | -10.13% | -4.44% | 4.23% | 12.50% | 13.01% |
| Diversified Fixed Interest | -1.89% | -2.80% | -3.07% | 1.80% | 3.76% |
| Cash | 0.03% | 0.15% | 0.15% | 1.13% | 1.86% |
*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 for periods 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 for super (accumulation) accounts. TTR Income accounts will be adjusted to refund the administration fee deducted from investment returns. All TTR administration fees are deducted from account balances.
The performance results for members in Choice Income accounts, tell a similar story to accumulation. In this case, the Balanced option delivered a return of -2.28% for the March quarter, 2.89% for the financial year-to-date and 10.81% per annum over 10 years.
Choice Income investment option performance as at 31 March 2022
| Investment Option | 3 months | FYTD | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | -2.84% | 2.97% | 11.12% | 11.02% | 12.03% |
| Balanced | -2.28% | 2.89% | 9.67% | 9.87% | 10.81% |
| Socially Aware | -3.40% | 2.22% | 9.41% | 8.45% | 10.21% |
| Indexed Diversified | -3.84% | 1.74% | 8.19% | 8.78% | 9.14% |
| Conservative Balanced | -2.33% | 1.44% | 6.35% | 7.70% | 8.99% |
| Stable | -1.91% | 0.39% | 3.39% | 5.59% | 6.87% |
| DIY Mix Options | |||||
| Australian Shares | 2.88% | 9.82% | 20.42% | 11.79% | 12.38% |
| International Shares | -11.03% | -5.02% | 4.31% | 13.46% | 14.34% |
| Diversified Fixed Interest | -2.21% | -3.29% | -3.68% | 2.15% | 4.36% |
| Cash | 0.05% | 0.08% | 0.10% | 1.33% | 2.17% |
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
As we can see from the tables above, returns for listed shares were mixed over the March quarter. Australian shares held strong compared to international shares. In Australia, the financials, materials and energy sectors performed well. These make up about half of the portfolio. In international markets, the lower performance was largely because of higher exposure to sectors that are sensitive to interest rates like information technology.
Looking ahead
The challenging conditions experienced by investment markets so far this year may continue over the short term. Inflation, rising interest rates, geopolitical events and the continuation of COVID-19 are some of the risks.
Managing inflation and economic growth is likely to be a key driver of investment markets going forward.
Adjusting member investments as markets change
As investment markets adapt to economic changes, the investment team are taking steps to reduce the risk in the portfolio. This means we’re reducing our exposure to growth assets over time in favour of asset classes that carry lower levels of risk.
In the first three months of this year, we reduced the exposure of the Balanced option to international shares, credit and cash asset classes. At the same time we increased the exposure to private equity, direct property, unlisted infrastructure and fixed interest asset classes.
Recently we announced the addition of new unlisted assets in the portfolio:
- The £290 million property investment in Canada Water. This fits with our focus of investing at scale in large mixed-use projects in major urban centres. This 53-acre development is one of the largest London regeneration projects in history.
- The agreement to acquire Axicom by AustralianSuper and Singtel owned Australia Tower Network. The investment will significantly expand the portfolio’s exposure to the fast-growing digital infrastructure sector.
Read more: Understanding what your super is invested in
Exiting investments in Russia
AustralianSuper is deeply concerned about the invasion of Ukraine. AustralianSuper is in full compliance with all relevant sanctions and, in accordance with our portfolio management approach, actively manages the portfolio to address changing and emerging risks. We made the decision to exit the Russian market on 3 March 2022 as we formed a view that it had become uninvestable.
The Fund’s exposure to Russian assets was about 0.07% of total assets at the end of February 2022. We will continue to reduce our exposure and exit our holdings in Russia as markets permit. The decision to exit the Russian market has not had a material impact on investment performance for members.
Staying calm when markets move up and down
No-one knows how or when the situation in Ukraine will end or what COVID-19 may bring next. Investment markets have always functioned in complex ever changing environments and AustralianSuper has a global team of more than 220 investment specialists experienced in identifying opportunities to grow member returns.
When it comes to your super, the key thing to remember is to look past short-term market movements and consider your super as a long-term investment. This also applies in retirement. Although fluctuations in your super balance can be a worry, volatility is normal in investing. And as we saw in March 2020, markets can rebound very quickly after a downturn.
Our data has shown that making decisions based on short-term market movements can leave members worse off in the long run. To learn more, read our article on switching risks.
Seeking advice to help guide your investment decisions
If changes to your super balance are keeping you up at night, it may be worth speaking to a financial adviser. They can help guide you through market ups and downs, so you can make the best decisions for your retirement.
This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/pds or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.
AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.