Investments

Happy New Year, everyone, and welcome to our mid-year performance update. I'm Mark Delaney, Chief Investment Officer at AustralianSuper.

Despite some ups and downs in markets over the past six months, members will be pleased to see we've got positive returns by the end of December.

For members in the Balanced option, the six months ending 31 December delivered a return of 3.49% for Super accounts and 3.90% for Choice Income or Retirement accounts. In fact, all Premixed and DIY options delivered positive investment returns for the second quarter and for the financial year-to-date.

Importantly, these returns continue to drive strong long-term performance. Over the past ten years, members in the Balanced option have received an average annual return of 7.94%, and 8.75% for each year for the Choice Income or Retirement accounts.

The key factors influencing markets have been lingering inflation, mixed economic sentiment, geopolitical conflict and speculation about interest rates. These factors have resulted in more volatility over the past six months.

After a strong start to the financial year, markets fell in September and October on concerns that interest rates might rise further. But this reversed in November and December, as interest rates fell sharply on better-than-expected inflation news. The result was a strong finish to the second quarter and a good outcome for members.

Much of these strong positive returns came from share markets. Australian shares were our best performing asset class over the past six months, driven in part by strong iron ore and gold prices. International shares also lifted performance, boosted by strong returns from the technology sector.

Our investments in private markets provided stability, but with more modest returns coming from infrastructure, private equity and private credit. Unlisted property returns fell during the quarter, faced with the lagged effect of higher interest rates.

But fixed interest and cash benefitted from the higher and more stable interest rates and delivered positive returns.

While we've enjoyed a positive end to 2023, we're cautiously monitoring the path forward. The decisions that central banks make this year will be key for markets.

Higher interest rates have helped reduce inflation so far, but inflation still remains above central bank targets, so we'll need to see that fall further. And if central banks cut rates too early, inflation could bounce back. So, it's a delicate balancing act.

In our view, while interest rates remain high, we may see weaker economic growth, continued volatility and more modest returns in the short term compared to the past ten years. But this environment will provide opportunities for active managers like AustralianSuper. We've positioned the portfolio to provide a balance of growth potential and downside protection.

Now, as much as ever, it's important to remember that super is a long-term investment. As a long-term investor, we're focused not only on managing the portfolio through the current phase of the market cycle, but we're also actively seeking opportunities with long term value for members.

If you have any questions about our investment performance, join our webinar on February 14. Experts from across the Fund will discuss performance of investment options in more detail. They'll also cover the latest developments in the Australian and global economies and the potential impacts on investment markets and Super. Registrations are now open on our website.

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.