Looking back at 2020: Investment performance

AustralianSuper’s Education Manager - Peter Treseder, and Manager of Portfolio Reporting, Emma Negri provide an in-depth look at investment performance in 2020, and the importance of thinking long term when it comes to your super.

When it comes to investing and super, 2020 had it all: early growth, a rapid and significant fall, and a strong and steady recovery. While times of uncertainty are unnerving, AustralianSuper members should be reassured to know the Fund has over 150 investment professionals in-house, situated around the world, who monitor markets and are experienced in managing the portfolio through market events and cycles.

We don’t let short-term volatility cloud our judgement. As Australia’s largest super fund, we make informed decisions, and manage the portfolio for the long term with one main aim - to help all members achieve their best possible retirement outcomes.

 

Peter Treseder and Emma Negri take an in-depth look at investment performance in 2020

Peter and Emma’s 3 key takeaways

1. The level of ups and downs in your investment option in 2020 depended on asset allocation

How your super investment option performed in 2020 depended on the asset allocation – meaning whether your investment option has more of a focus on growth or defensive assets. For example, AustralianSuper’s PreMixed options with a capital growth focus include: Balanced option, High Growth, and Socially Aware, and Index Diversified.

  • High Growth – has a high allocation to growth assets, such as shares. This means it had a more volatile performance, seeing higher highs and lower lows. However, it generated a higher return over the year, compared with options that have a more defensive allocation.
  • Balanced – has 70% allocation to growth assets (and 30% defensive) and it had returns slightly lower than the High Growth, yet still showed strong performance for the year.
  • Conservative Balanced – has a 50/50 allocation to growth and defensive. It achieved a solid return, but without moving as high when performance was strong, and not falling as low when performance came under pressure during the height of COVID.
  • Stable – has a higher defensive allocation (70% defensive, 30% growth). As such, the returns over one year were more moderate compared to the other options. During the downturn it didn't fall by as much, and then during the recovery over the remainder of the year, the returns were not as high as the other options.

 

EXPLORE AUSTRALIANSUPER’S PREMIXED INVESTMENT OPTIONS
 
2. In 2020, investment markets recovered faster than in previous downturns

When it comes to investment markets, compared to previous downturns – for example the Global Financial Crisis (GFC) and Brexit – the recovery time was much shorter for the COVID-19 dip. Markets recovered from the downturn and were back to pre-COVID levels in under a year.

This highlights how important it can be to have and stick to a long-term plan, as market downturns may be ironed out over time. This involves avoiding unnecessary risks, such as switching investment options, because of short-term volatility.

AustralianSuper experts have undertaken substantial research on switching patterns of the Funds’ members1. We’ve found that, on average, the decision to switch investment options – during a downturn – leaves many members worse off over the long-term, compared to sticking with their investment strategy.

READ MORE: THE POTENTIAL RISKS OF SWITCHING YOUR INVESTMENT OPTIONS

 

3. Committing to net zero carbon emissions by 2050

AustralianSuper supports the global scientific consensus that climate change is having significant physical, social and economic effects. To offset the risk of economic impact on investments, we’re taking substantial actions to support the net zero 2050 goal of the Paris Agreement.

These actions involve investing in companies with good environmental, social, and governance (ESG) management. This can provide better long-term returns for members, and is therefore consistent with our objective of helping members to achieve their best possible retirement outcome.

READ ABOUT: ACTION ON CLIMATE CHANGE – COMMITTING TO NET ZERO CARBON EMISSIONS BY 2050

 

Source:
1. Member switches: Member switches reviewed between July 2009-June 2014. Data from Owen Joseph Scott, 2015

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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