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
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.