23 January 2023
Members benefit from positive investment performance
AustralianSuper delivered positive returns for members in the December 2022 quarter, with all diversified PreMixed investment options finishing in positive territory.
AustralianSuper’s flagship Balanced option (Accumulation), where most members are invested, returned 3.18% for the quarter ending 31 December 2022. The Balanced option for Choice Income (Retirement) accounts returned 3.33% for the December 2022 quarter.
As AustralianSuper’s Chief Investment Officer Mark Delaney comments, “It’s pleasing to deliver a positive quarterly return for members, as we continue to deliver on our purpose of helping Australians retire well.
“While our long-term investment performance remains strong1, we are cautious about the near-term outlook for investment markets, as high inflation and rising interest rates are likely to curb global economic growth in 2023. We continue to maintain a defensive investment strategy and are watching economic and market indicators closely. By actively managing a diversified portfolio, we’re well positioned to capitalize on growth opportunities if we see signs of an uplift.”
FY23 mid-year investment performance update with Chief Investment Officer Mark Delaney
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Show Transcript
Happy New Year everyone. And welcome to our mid-year performance update. I’m Mark Delaney, Chief Investment Officer at AustralianSuper.
I'm pleased to report that we've had a positive start to the 2023 financial year, with all diversified pre-mixed investment options finishing in positive territory.
For the six months ending 31 December 2022, the Balanced option returned 2.79% for super accounts and almost 3.00% for Choice Income accounts, which is our retirement product.
Although listed shares faced significant headwinds during the period, as the market priced in higher interest rates, they were still the largest contributor to the Balanced option's positive performance. In particular, the performance of Australian shares was strong relative to most global share markets.
We also saw strong performance from our investments in unlisted infrastructure and private credit. This highlights the importance of investing in a well-diversified investment portfolio across different asset classes. This is a cornerstone of our investment approach.
The 2022 calendar year was a challenging year for investment markets – with a steep rise in inflation, central banks globally increasing interest rates, and subsequent higher volatility.
We know members also felt this in their day to day lives, as the price of food, petrol, and monthly mortgage expenses rose.
Over the past few months, we've seen some positive signs emerge. Inflation has started to fall in some major economies and, while central banks are still increasing interest rates, they are slowing the pace.
However, we don't believe we're out of the woods just yet. In 2023, we expect inflation to remain above the targets of central banks and interest rates to remain elevated to combat inflation. This will continue to slow global growth in 2023.
Now, as much as ever, it's important to know that your super is in good hands. As we move through the market and economic cycle, our global investment team of close to 300 people will continue to actively manage the portfolio to deliver long-term growth.
This chart shows us what that's all about, in dollar terms. Over the past 20 years, $100,000 invested in the Balanced option grew to over $460,000 – without additional contributions.
As you can see, history shows that market downturns and recoveries are to be expected over the lifetime of superannuation investing. This graph also shows the exceptional growth of members’ retirement savings over the past decade.
Looking forward — in an environment of higher interest rates, returns for the next 10 years are likely to be more modest. However, we still expect there to be attractive investment opportunities.
Thank you.
This video 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.
Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.
End Transcript
Navigating market headwinds
The 2022 calendar year was challenging for investment markets – with a steep rise in inflation, central banks globally increasing interest rates at a record pace and subsequently higher market volatility.
Over the past few months, we’ve also seen some positive signs emerge. Inflation has started to fall in most major economies and while central banks are still increasing interest rates, they are slowing the pace of rate rises. Markets responded favourably with strong performance in October and November.
However, market headwinds returned in December and offered a reminder that we can expect ongoing volatility for some time.
In 2023 we expect inflation to remain above central banks’ targets and interest rates to remain elevated to combat inflation. This will continue to slow global growth into 2023 and the risk of recession in major economies remains high.
The benefits of diversification
Listed shares were the largest contributor to the Balanced option’s positive performance. In particular, the performance of Australian shares was strong relative to most global share markets. We also saw strong performance from our investments in unlisted infrastructure and private credit. Meanwhile rising interest rates continued to negatively impact the returns of fixed interest securities.
The ups and downs of different asset classes over the quarter highlights the importance of investing in a well-diversified portfolio across different asset classes, geographies and sectors - a cornerstone of our investment approach.
Investment option performance
All PreMixed investment options finished in positive territory for the quarter ending 31 December 2022. AustralianSuper’s flagship Balanced option returned 3.18% for Accumulation accounts and 3.33% for Choice Income accounts for the December 2022 quarter.
The Balanced investment option, over the last 10 years to 31 December 2022, has delivered an average return of 8.76% each year for Accumulation accounts and 9.63% each year for Choice income accounts.
AustralianSuper has a strong track record as a top performing super fund. The Balanced option ranks in the top two for investment returns over the last 7, 10 and 20 years1.
Super and TTR Income investment option performance as at 31 December 2022
| Investment Option | 3 months | FYTD | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 3.88% | 3.62% | -5.69% | 7.11% | 9.73% |
| Balanced | 3.18% | 2.79% | -4.76% | 6.47% | 8.76% |
| Socially Aware | 2.92% | 2.05% | -6.47% | 5.08% | 8.00% |
| Indexed Diversified | 4.50% | 4.08% | -6.77% | 5.62% | 6.94% |
| Conservative Balanced | 2.18% | 1.56% | -4.79 | 4.81% | 6.88% |
| Stable | 1.42% | 0.84% | -3.68% | 3.47% | 5.24% |
| DIY Mix Options | |||||
| Australian Shares | 8.09% | 8.63% | 1.41% | 8.61% | 9.77% |
| International Shares | 4.78% | 3.54% | -14.65% | 8.39% | 11.95% |
| Diversified Fixed Interest | 0.39% | -0.97% | -4.50% | 0.69% | 2.69% |
| Cash | 0.62% | 1.03% | 1.17% | 1.09% | 1.69% |
AustralianSuper investment returns are based on crediting rates, which are returns less investment fees and costs, transaction costs, the percentage-based administration fee deducted from returns from 1 April 2020 to 2 September 2022 and taxes. Investment returns aren’t guaranteed. Past performance isn’t 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 to 2 September 2022 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 Income administration fees are deducted from account balances.
Choice Income investment option performance as at 31 December 2022
| Investment Option | 3 months | FYTD | 1 year | 5 years pa | 10 years pa |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 4.21% | 3.99% | -6.04% | 7.79% | 10.75% |
| Balanced | 3.33% | 2.95% | -5.18% | 6.97% | 9.63% |
| Socially Aware | 3.06% | 2.20% | -7.18% | 5.58% | 8.91% |
| Indexed Diversified | 4.89% | 4.29% | -7.80% | 6.18% | 7.96% |
| Conservative Balanced | 2.32% | 1.73% | -5.31% | 5.32% | 7.75% |
| Stable | 1.49% | 0.91% | -4.18% | 3.82% | 5.89% |
| DIY Mix Options | |||||
| Australian Shares | 8.52% | 9.30% | 1.77% | 9.79% | 11.00% |
| International Shares | 5.16% | 3.77% | -15.90% | 8.95% | 13.19% |
| Diversified Fixed Interest | 0.36% | -1.12% | -5.32% | 0.83% | 3.09% |
| Cash | 0.73% | 1.19% | 1.37% | 1.28% | 1.99% |
Choice Income investment returns are based on crediting rates, which are returns less investment fees and costs and transaction costs. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
Looking ahead
We anticipate global growth will continue to slow in 2023. Although central banks have begun to slow the pace of interest rate rises, we expect to see additional rate increases in the first half of 2023. This should act to reduce inflation but may also reduce global economic growth in the near term.
In response, the Investment Team is focused on investing in the mix of asset classes that should provide a balance of growth and downside protection to meet each investment option’s objectives.
While we remain defensively positioned and expect continued volatility in investment markets, this can also create attractive investment opportunities for long-term investors. As the economic cycle progresses and markets react, we will continue to adjust the portfolio to manage risk and take advantage of long-term investment opportunities.
Hear from economic and investment market experts
If you’d like to learn more about the outlook for investment markets and what this might mean for your super – join our panel of experts, including Amber Rabinov (Head of Macro Research), on Wednesday, 15 February 2023.
References
1. AustralianSuper Balanced investment option as compared to the SuperRatings Fund Crediting Rate Survey – SR50 Balanced (60-76) to 31 December 2022. Investment returns aren’t guaranteed. Past performance is not a reliable indicator of future returns. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
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. 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.
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