14 March 2023
Current global conditions continue to fluctuate, but long-term performance may help your super recover.
If you’re invested with one of our PreMixed options – your super is invested across a wide array of asset classes including shares, private equity, infrastructure, property, fixed interest, credit and cash. So naturally, your super’s performance may reflect the performance of these investments.
While investment markets have recovered from the COVID-19 downturn, there is still market volatility, especially among listed shares. Uncertainty regarding geopolitics, inflation and interest rates have weighed on market returns. The potential for slower economic growth in the coming year is also a consideration that is affecting returns.
Below are some factors that can affect the value of your super. It’s good to remember that short term fluctuations are a natural part of the economic cycle and that super is a long-term investment.
Share market performance– Australian and International
As investors buy and sell shares based on expected growth and returns, share prices go up and down. With current conditions, Australian and international shares are vulnerable to declining values due to more unstable global conditions. Share markets are experiencing their fair share of ups and downs as they consider the level of inflation, increasing interest rates and corporate profitability. The performance of your super may reflect these conditions.
The good news is that the economy moves in cycles and historically has recovered from low growth conditions. This may help your super recover in the long term.
Inflation / cost of living
Historically, inflation hasn’t been a major economic issue since the Oil Crisis in the 1970s, with lagging effects creeping into the first half of the 1980s. During the 1990s and beyond, inflation remained under control. However, post COVID-19, inflation has reared its ugly head in a similar vein to the 1970s. Inflation isn’t good for business confidence, as it’s harder to predict business performance. As a result, the share market suffers too as investors are more apprehensive.
As a result of current inflationary pressure, the Reserve Bank of Australia and central banks around the world have been increasing interest rates to reel in inflation. The rising interest rates aim to reduce consumer spending to help lower inflation.
As a result of decreased household spending, profits for companies are expected to decrease as consumption falls. Higher borrowing costs also weigh on corporate profitability, which can potentially lower share market returns. Higher interest rates can also hinder the returns of fixed interest assets, as their prices fall when interest rates rise.
With super invested in international shares around the world, and with current conditions in Eastern Europe due to the Ukraine War, economic uncertainty has spread across Europe and the world.
According to the International Monetary Fund1:
- The conflict is a major blow to the global economy that will hurt growth and raise prices.
- Beyond the suffering and humanitarian crisis, the entire global economy will feel the effects of slower growth and faster inflation.
- Higher prices for commodities like food and energy will push up inflation further.
- Reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets.
AustralianSuper’s investment strategy
To grow members’ retirement savings over the long term, we invest in a diversified portfolio that includes investments across a range of asset classes. This helps cushion the impact of downturns; whilst helping members benefit from growth as markets recover.
AustralianSuper monitors all costs that impact performance results for members. The Investment team has cost objectives to help ensure that the return and value add to members is gained within the cost budget. This includes cost of investment management, transaction costs and implementation costs.
With a long-term focus on managing the portfolio through the current market cycle, our 300+ investment team is looking at long term trends, including the potential impacts of technological disruption, climate change, geopolitics and increased government intervention. This research helps inform our thinking about the risks and opportunities that lie ahead as we build a robust portfolio for the future to meet our investment objectives and help members reach their best financial position in retirement.
Looking at long-term performance
With your super, it’s good to remember that short-term performance can have its share of fluctuations and that super is a long-term investment. AustralianSuper’s flagship Balanced investment option has delivered strong long-term performance for members, delivering an average annual return of 8.76% over the last 10 years and 8.02% over the last 20 years.2
Fees and costs
We know that ensuring our fees are fair and equitable plays a big part in helping Australians retire well. We are committed to doing what we can to keep admin fees low3 for members.
To see how AustralianSuper’s fees and costs, as well as returns compare to other super funds, visit the website:
1. International Monetary Fund, March 2022: How War in Ukraine is reverberating across the world.
2. As at 31 December 2022. 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. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
3. Source: Zenith CW Pty Ltd (Chant West) (ABN 20 639 121 403). Chant West Super Fund Fee Survey September 2022. Survey compares administration fees and costs for MySuper products for a $50,000 balance. Other investment fees and costs also apply. Fees may change in the future which may affect the outcome of this comparison.
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.
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