5 July 2023
AustralianSuper’s Balanced option delivers solid returns
AustralianSuper’s Balanced investment option (Accumulation), where most members are invested, returned 8.22% for the 2023 financial year. The Balanced option for Choice Income (Retirement) accounts returned 9.03%.
For AustralianSuper’s Chief Investment Officer Mark Delaney, “The rebound in investment performance this financial year is an important reminder to look past short-term investment returns and focus on consistent long-term performance.”
End of financial year 2023 investment performance update with Chief Investment Officer Mark Delaney
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Show transcript
Hi, everyone. I'm Mark Delaney, Chief Investment Officer for AustralianSuper, and welcome to our end of financial year 2023 update.
I'm pleased to report the Balanced plan had very solid returns last financial year. For those in the Super or Accumulation option, the Balanced plan earned 8.22%, and for those in the Retirement phase, or Choice Income, it earned a little over 9%.
Over the last 18 months, inflation has been much higher than anybody would have thought. Central banks around the world have responded to that by putting up interest rates, and you're seeing the Reserve Bank of Australia put up rates, and the US Federal Reserve put up rates, and the Bank of England put up rates.
Looking back over the last year, the main things which really stood out were higher interest rates and what happened in technology and technology stocks. Higher interest rates affected all investment asset classes, as they increased the discount rates across all investments, and they also affected all households, as those with mortgages and debts also saw their interest rates go up substantially. So high interest rates were a dampener on returns. At the same time, we saw strong earnings through a number of companies and expectations of strong earnings from a number of technology stocks, seeing those stocks go a lot higher. So a combination of technology and strong earnings, pushing up earnings for some asset classes, and high interest rates affecting the valuations of some other asset classes were the two main driving factors.
In summary, we think the high interest rates will start to have a bigger economic impact over the next 1 to 2 years. This will cause the economy to slow as people constrain their spending, for example, to meet higher mortgage payments and as spending slows, we also think profits will start to weaken.
Reflecting this outlook we’ve got the portfolio structured such that we have more fixed interest than we normally do, as that typically does very well when interest rates start to fall, and we have less equities than we’d normally hold, because they might struggle in an environment of falling profits.
As this environment unfolds, we're likely to look to redeploy the capital into new and better priced investment opportunities over the next 12 to 18 months. As an active investor, it is our job to manage a way through these circumstances and to deliver long term returns. We do this by looking at the environment and at the investment opportunities set and building a portfolio which best works for you in the long run.
When we look a little bit below the bonnet to see what really drove that 8.22% return for the Balanced plan, you see that the shares were the biggest drivers of returns. Australian equities were up over 14% and global equities were up over 19%. Some people might be surprised as to how strong that is, and that just reflects the fact that the environment was a little bit better and the share market recovered more than people probably would have anticipated.
Just think about a couple of these numbers. If you had $100,000 invested in the Balance plan 20 years ago, it would be worth $475,000 now. That's up almost five times over 20 years. And think about what's occurred over that 20 year period, COVID, the Financial Crisis, and all sorts of other issues.
What that tells you is a long term strategy, looking to make money over the medium term, 10, 20, 30, 40 years, allowing the effect of compounding, is the best strategy to build long term retirement savings.
We at AustralianSuper look for the best investment opportunities for members across the globe. As a way of executing on that, we've been building out our global investment capability with our offices in London and New York over the last 12 months. We think this platform of having people on the ground, close to the markets and close to the deal flow, will enable us to get better opportunities and better long term returns for members.
For those of you who would like to learn more about what we've discussed today, we're having a webinar on August 15 where a panel of experts will be able to discuss the issues and answer your questions. Please feel free to join us.
Finally, I'd like to thank you, the members, for putting your trust in us. We remain committed to using our size, scale and skill to deliver the best possible returns we can for members. And through those strong investment returns, we endeavour to deliver to members their best possible financial position in 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.
Investment returns aren’t guaranteed. Past performance is not 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
Strong long-term returns
AustralianSuper has consistently delivered strong long-term performance for members. Over the last 10 years to 30 June 2023, the Balanced investment option has generated an average return of 8.60% each year for super accounts and 9.48% each year for Choice income accounts.
With your super, it's important to focus on long-term performance – even if you are in or close to retirement. If 20 years ago you had a balance of $100,000, your super balance would now be $476,675. For every dollar a member invested in the Balanced option 20 years ago, they would have more than four dollars today1.
AustralianSuper is ranked number 2 for investment returns over the last 10 and 20 years, making it a top-performing fund over the long-term2.
The table below shows the Balanced option returns over the long and short term, compared to the median Fund.
Balanced option Super – returns to 30 June 2023
| SUPER RETURNS | ||
|---|---|---|
| TIME PERIOD TO 30 JUNE 2023 | BALANCED OPTION | BENCHMARK – MEDIAN RETURN |
| 1 year | 8.22% | 9.05% |
| 3 years pa | 8.23% | 7.52% |
| 10 years pa | 8.60% | 7.32% |
| 20 years pa | 8.12% | 7.61% |
Source: SuperRatings Fund Crediting Rate Survey SR50 (Balanced (60-76) Index to 30 June 2023. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
Balanced option for Choice Income accounts – returns to 30 June 2023
| ACCOUNT BASED PENSION - CHOICE INCOME BALANCED OPTION RETURNS | ||
|---|---|---|
| TIME PERIOD TO 30 JUNE 2023 | BALANCED OPTION | BENCHMARK – MEDIAN RETURN |
| 1 year | 9.03% | 10.06% |
| 3 years pa | 8.95% | 8.44% |
| 10 years pa | 9.48% | 8.20% |
| 15 years pa | 8.00% | 7.18% |
Source: Benchmark data: SuperRatings Fund Crediting Rate Survey SRP50 (Balanced (60-76) Index to 30 June 2023.
High inflation and rising interest rates impact performance
The 2022-23 financial year was challenging for investment markets and members alike – driven by high inflation and rising interest rates.
Members may have felt this in the form of higher costs of living, including rising mortgage payments, rent, energy and grocery prices. Markets felt this in the form of slowing economic activity and business profitability, increased volatility and failures in the global banking sector.
Some positive signs have emerged. Economic and company earnings data has remained resilient and inflation concerns are easing – leading central banks globally to slow the pace of interest rate rises.
READ MORE ABOUT INVESTMENT MARKET VOLATILITY
The benefits of diversification
Listed shares were the largest contributor to the Balanced option’s positive performance in FY23. Both international and Australian shares performed well.
We also saw meaningful contributions from the Fund’s investments in unlisted infrastructure and private credit. Meanwhile, rising interest rates continued to challenge performance of fixed income and property investments.
The ups and downs of different asset classes over the year highlights the importance of investing in a diversified portfolio across different asset classes, geographies and sectors – a cornerstone of our investment approach.
Our long-term investment strategy is designed to be resilient when markets move up and down. Diversification helps reduce overall risk, protecting against losses in single asset classes and improving the chances of achieving consistent returns over time.
Looking ahead
Our outlook suggests that investment markets will remain volatile as investors navigate weaker economic growth and business profitability. While this may impact performance, with investment returns likely to be more modest than some of the highs of the past decade, our global investment team of more than 300 investment professionals3 was purpose-built to navigate challenging markets for members.
Our Investment Team has moved to a more defensive strategy, as conditions become less supportive of growth asset classes, such as listed shares. The team is focused on investing in a mix of asset classes that should provide a balance of growth and downside protection to meet each investment option’s objectives.
As the economic cycle progresses, we will continue to adjust the portfolio to manage risk and take advantage of long-term investment opportunities. We actively position the portfolio to help deliver the best outcomes for members over the long term.
READ MORE ABOUT THE BENEFITS OF ACTIVE MANAGEMENT
References:
1. AustralianSuper super investment returns are based on crediting rates to 30 June 2023, 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 don’t include all administration, insurance and other fees and costs that are deducted from account balances. 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.
2. AustralianSuper Balanced investment option compared to the SuperRatings Fund Crediting Rate Survey, SR50 Balanced (60-76) Index to 30 June 2023. 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. As at July 2023.
Investment returns aren’t guaranteed. Past performance is not a reliable indicator of future returns.
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.