4 July 2022
It’s been a year of ups and downs in investment markets, both globally and locally. For AustralianSuper members, this is only the fourth time in 36 years where the Balanced option has experienced a negative annual return. For those in retirement with Choice Income accounts, it’s only the second time since 2008 (when Choice Income was launched) that returns have been negative. While this can be unsettling to see, it’s important to look at performance over the long term - with super, that’s the number to focus on.
With your super it's important to look at long-term performance. The average return over 10 years for AustralianSuper’s Balanced option is 9.32% per annum to 30 June 20221. For the Balanced option for Choice Income accounts, the 10 year average return is 10.27% per annum.1
This financial year (1 July 2021 – 30 June 2022) has been one of market ups and downs. Falls in global investment markets over the first 6 months of 2022 resulted in negative annual returns for both accumulation and retirement accounts. For members in the Balanced option the annual return is of –2.73%. For members in the Balanced option for Choice Income accounts the annual return is -3.02%.1
AustralianSuper is a top-performing fund over the long term
AustralianSuper is ranked number 2 over 7, 10 and 20 year performance making it a top-performing fund over the long term2. We're focused on helping members achieve their best financial position in retirement.2
2021 - 2022 End of financial year investment performance update with Chief Investment Officer Mark Delaney
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Show Transcript
Hi everyone. Welcome to our end of financial year performance update. I’m Mark Delaney – head of the investment team at AustralianSuper.
After more than a decade of growth, in which the Balanced option has delivered an average annual return of 9.3% to 30 June 2022, the past twelve months have seen considerable volatility in investment markets. This has impacted member balances.
So what’s driving this volatility?
There are a number of reasons – including:
- Geopolitical tensions
- Increases in inflation and
- Rising interest rates
For example - pent-up demand from consumers, supply chain blockages and the war in Ukraine have all contributed to higher prices, especially food and fuel prices.
To curb this rising inflation, central banks have responded by raising interest rates to slow demand.
This has resulted in falls in investment markets.
While you may have seen news headlines about large falls in share markets, it is important to remember that the balanced option is a diversified portfolio, that also invests in fixed interest, cash, infrastructure, property, private equity and credit assets.
Investing in these other asset classes, which are typically less volatile than listed shares, means that portfolio returns are cushioned from the significant volatility we are seeing in share markets.
So while international markets were down 8.1%, for the 12 months to 30 June 2022, the Balanced option has returned -2.7%.
After a long period of positive returns, we understand that it’s hard to see negative returns in your super, especially for members in or near retirement. Given that super is set up as a long-term investment, it’s important to look at returns in a long-term context.
The following chart shows us that over the last 36 years, the Balanced option has had only 4 years of negative returns.
While there can be periods of lower returns, by staying invested you have the opportunity to participate in the growth when there is a market recovery.
The next chart, shows us what this looks like in dollar terms. Over 20 years to 30 June 2022, $100,000 invested in the Balanced option grew to $453,258 – without additional contributions.
History shows that market downturns and recoveries are to be expected over the lifetime of superannuation investing.
Despite different market events including the Global Financial Crisis and the COVID-19 Pandemic, over the long-term, markets and member balances have recovered and moved higher. After more than a decade of economic growth, we’re expecting a shift from economic expansion to slowdown in the coming years.
After more than a decade of economic growth, we’re expecting a shift from economic expansion to slowdown in the coming years.
In response, we‘ve shifted the portfolio to a more defensive strategy. This means we’re increasing our investments in fixed interest and reducing our investment in growth assets like listed shares. As we move through the economic cycle and investment markets respond, we‘ll continue to adjust our asset allocation to manage risk in the portfolio.
As we move through the economic cycle and investment markets respond, we‘ll continue to adjust our asset allocation to manage risk in the portfolio.
As long-term investors, we know that periods of market volatility can create good investment opportunities. We’re actively looking for investment opportunities that may have been mispriced by the market in the short term and to make investments where we see long-term value.
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. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.End Transcript
Events impacting performance in the last 12 months
Over the past financial year a range of events have affected the economy and investment markets. In the first 6 months, investment markets benefited from the economic recovery following the COVID-19 downturn.
More recently, pent-up demand from consumers, supply chain blockages and the war in Ukraine have all contributed to price rises for people’s day to day spending – both at home and globally. Central banks responded to these events by raising interest rates.
Investors are becoming more cautious about the impact of price hikes and interest rate increases on consumer spending and business profitability. This has resulted in a fall in investment markets, which has impacted member balances across the super industry.
The benefits of diversification
Market ups and downs are a normal part of investing and are something our investment team is prepared for.
Our long-term investment strategy is designed to be resilient when markets are volatile. The Balanced option is a diversified portfolio, investing across many asset classes, sectors and geographies. The benefit of this diversification is to cushion the impact of downturns, while making sure members benefit as markets recover.
This year, positive returns in unlisted infrastructure, unlisted property, private equity and private credit have all helped to cushion the fall in global share and bond markets.
The Australian share market has returned -6.5% and the international share market has returned -8.1% for the 12 months to 30 June 20223. In comparison the Balanced option has delivered a return of –2.73% in accumulation accounts and –3.02% in Choice Income accounts.
The importance of a long-term investment view
History shows that market downturns and recoveries are expected over the lifetime of superannuation investing. In the Balanced option we estimate the option could have about 5 negative annual returns over any 20-year period4.
Having a long-term focus provides members with a more realistic perspective of superannuation investment returns. Even members in or close to retirement could still have their super invested for another 10-20 years at least.
Read more: Market cycles and super – it’s all about the long term
Long-term returns for the Balanced option
The table below shows the Balanced option returns over the long and short term, compared to the median Fund. AustralianSuper remains a top performing Fund5.
Balanced option Super– returns to 30 June 2022
| Time period to 30 June 2022 | Balanced option | Benchmark – median return |
|---|---|---|
| 1 year | -2.73% | -3.44% |
| 5 years pa | 7.28% | 5.94% |
| 10 years pa | 9.32% | 7.99% |
| 20 years pa | 7.84% | 7.04% |
Balanced option for Choice Income accounts – returns to 30 June 2022
| Time period to 30 June 2022 | Balanced option | Benchmark – median return |
|---|---|---|
| 1 year | -3.02% | -4.09% |
| 5 years pa | 7.89% | 6.38% |
| 10 years pa | 10.27% | 8.92% |
Growth of a $100,000 super balance over the long term
The below chart shows how much your super balance would've grown from a starting point of $100,000, over 1, 3, 5, 10, 15 and 20 year periods to 30 June 2022.
| Time period to 30 June 2022 | Performance (p.a) | Value of $100,000 for the time period invested |
|---|---|---|
| 1 year | -2.73% | $97,269 |
| 3 years | 5.59% | $117,758 |
| 5 years | 7.28% | $142,137 |
| 10 years | 9.32% | $243,914 |
| 15 years | 6.13% | $244,178 |
| 20 years | 7.84% | $453,258 |
For example, if you had a balance of $100,000 20 years ago your super balance would now be $453,258. If you started 5 years ago with a balance of $100,000 your super balance would now be $142,137.
You can view the investment returns for all our investment options on our Performance page.
Looking ahead
After more than a decade of strong growth, our outlook suggests we’re entering a period of weaker economic growth may see lower returns than in previous years.
As the economic cycle progresses and markets respond, the investment team will continue to adjust the portfolio. This helps manage risk and allows us to take advantage of long-term investment opportunities.
Read more: Understanding investment market cycles
Super projection calculator
Investing in your future now could make a big difference. Our Super Projection Calculator can help you work out if you’ll have enough income for your retirement needs, estimate how long your super could last, and see the difference adding to your super now could make to your retirement in the long run.
Before you start, think about how much you'll need to retire and when you’d like to retire.
References:
1. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
2. AustralianSuper Balanced investment option compared to the SuperRatings Fund Crediting Rate Survey, SR50 Balanced (60-76) Index to 30 June 2022. 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. S&P/ASX 200 Index and MSCI All Country World ex Australia Index (in AUD).
4. This statistic is calculated by simulating the probability of an investment option delivering a negative annual return in any one year and multiplying this by 20. This provides an estimate of how often you can expect to receive a negative annual return in any 20-year period.
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.