19 October 2023
Long-term returns remain strong, despite volatility in investment markets
Investment markets go through cycles of both positive and negative performance. Although recent market returns have been volatile, our investment team has positioned the portfolio to invest through the current market and economic conditions, to cushion the impact of the market’s ups and downs.
Over the past 3 months to 30 September 2023, we’ve seen increased uncertainty around inflation and interest rates. This contributed to investment markets seesawing up and down over the quarter.
Listed share markets rose in July, then fell in August and September, in response to rising market interest rates. The outcome was a subdued end to the quarter for each of AustralianSuper’s PreMixed options.The Balanced option returned -0.11% for super accounts and -0.13% for Choice Income accounts for the three months ending 30 September 2023, which outperformed the median balanced fund by 0.41% (super accounts) and 0.46% (Choice Income), respectively1 .
Importantly, long-term returns in each of the PreMixed options remain strong – with an 8.04% average annual return over 10 years for AustralianSuper’s Balanced option for super accounts and 8.86% for the Balanced option for Choice Income accounts to 30 September 2023.
AustralianSuper is ranked number 2 for investment returns over the last 10, 15 and 20 years, making it a top-performing fund over the long-term1.
Super and TTR Income investment option performance as at 30 September 2023
| INVESTMENT OPTION | 3 MONTHS | 1 YEAR | 5 YEARS PA | 10 YEARS PA |
|---|---|---|---|---|
| PreMixed Options | ||||
| High Growth | -0.09% | 10.65% | 6.97% | 8.96% |
| Balanced | -0.11% | 8.51% | 6.17% | 8.04% |
| Socially Aware | -0.65% | 7.65% | 4.68% | 7.01% |
| Indexed Diversified | -0.32% | 11.65% | 5.81% | 6.67% |
| Conservative Balanced | -0.14% | 6.14% | 4.61% | 6.29% |
| Stable | -0.20% | 3.83% | 3.19% | 4.81% |
| DIY Mix Options | ||||
| Australian Shares | 0.75% | 14.23% | 8.51% | 8.71% |
| International Shares | -0.63% | 18.11% | 8.70% | 11.21% |
| Diversified Fixed Interest | 0.38% | 1.22% | 0.63% | 2.54% |
| Cash | 0.96% | 3.16% | 1.30% | 1.73% |
AustralianSuper investment returns are based on crediting rates, 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. TTR Income accounts will be adjusted to refund the administration fee deducted from investment returns. All TTR Income account administration fees are deducted from account balances. Returns don’t include all administration, insurance and other fees and costs that are deducted from account balances.
Choice Income investment option performance as at 30 September 2023
| INVESTMENT OPTION | 3 MONTHS | 1 YEAR | 5 YEARS PA | 10 YEARS PA |
|---|---|---|---|---|
| PreMixed Options | ||||
| High Growth | -0.09% | 11.77% | 7.70% | 9.92% |
| Balanced | -0.13% | 9.29% | 6.71% | 8.86% |
| Socially Aware | -0.71% | 8.45% | 5.18% | 7.84% |
| Indexed Diversified | -0.41% | 13.31% | 6.47% | 7.65% |
| Conservative Balanced | -0.16% | 6.81% | 5.13% | 7.13% |
| Stable | -0.22% | 4.34% | 3.55% | 5.44% |
| DIY Mix Options | ||||
| Australian Shares | 0.92% | 15.67% | 9.77% | 9.87% |
| International Shares | -0.70% | 19.79% | 9.33% | 12.31% |
| Diversified Fixed Interest | 0.45% | 1.27% | 0.74% | 2.89% |
| Cash | 1.13% | 3.72% | 1.53% | 2.03% |
Choice Income investment returns are based on crediting rates, which are returns less investment fees and costs, transaction costs and taxes. Doesn’t include all administration and other fees and costs that are deducted from account balances.
Returns for listed shares were mixed during the quarter. The Australian Shares option delivered a positive return, while the International Shares options had a negative return. In Australia, the energy, consumer discretionary and financial sectors performed well, while other sectors had negative performance. Similarly, in international shares, the energy sector also performed well, while all other sectors had negative or modest positive performance for the quarter. The Cash and Diversified Fixed Interest options delivered modest positive returns during the quarter.
How long will these conditions last?
The issues impacting investment markets in the September quarter – inflation, rising interest rates and the prospect of declining economic growth – are expected to remain for the short to medium term, likely delivering further volatility in investment returns.
As members may have heard in our recent briefings, we’ve anticipated these issues for some time and have been taking action to adjust the investment portfolio. Specifically, we’ve reduced our exposure to growth assets, such as international and Australian shares, in favour of assets that carry lower levels of volatility. This includes increased exposure to bonds and infrastructure investments, which have historically offered more stable returns. Although a defensive portfolio may not prevent negative returns, it can help protect the portfolio when listed equity markets fall.
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We understand that it’s unsettling to see volatility impacting your returns. But it's important to remember that volatility is quite normal in investment markets. While market falls can be unnerving, these falls can also present good long-term investment opportunities. Think of it as shopping when department stores are selling at discounts – for long-term investors, volatile markets may present buying opportunities.
Our size, scale and global investment capabilities mean we can take advantage of attractive investment opportunities as they arise. Opportunities like our recent $2.5 billion investment in Vantage Data Centers EMEA – one of the fastest growing hyperscale data center platforms in Europe. In recent years, we’ve seen increasingly attractive opportunities in digital infrastructure. This new investment in Vantage complements existing investments in our portfolio, such as Indara, one of the leading owners and operators of digital infrastructure in Australia.
Historically, investment markets have recovered from economic downturns and moved into expansion phases that support the returns of growth assets. When economic conditions improve, the investment team will adjust the Fund’s investments to increase the level of exposure to growth assets, so that members can benefit from a recovery in investment markets.
The importance of focussing on the long term
It’s easy to get distracted by short-term movements in investment markets and your super balance. History shows us just how important it is to stay focussed on the long term. This is clearly demonstrated in the chart below. Here we see that over a period of 20 years, despite ups and downs in the market, members’ super invested in the Balanced option has grown significantly. A balance of $100,000 20 years ago would be worth over $460,000 today – more than four times the initial investment amount.
Growth of $100,000 from 30 September 2003 to 30 September 2023 in the Balanced option
AustralianSuper investment returns are based on crediting rates, 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.
Learn more about the investment decisions behind your super
To help you understand how markets work, how investment decisions are made and the defining moments for AustralianSuper members, we’ve created a podcast series titled ‘Moments that Count.’ In episode 15 of this series, we discuss the process of investing members’ money, the different types of assets, why markets move up and down, the value of diversification and why it’s important to take a long-term view with your super.
References
1. AustralianSuper Balanced investment option compared to the SuperRatings Fund Crediting Rate Survey - SR50 Balanced (60–76) Index and SRP50 Balanced (60-76) to 30 September 2023.
Investment returns aren’t guaranteed. Past performance isn’t 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.
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