16 January 2024
AustralianSuper delivers positive investment performance for members
AustralianSuper members benefitted from positive returns in the December 2023 quarter. All PreMixed and DIY Mix investment options delivered solid investment performance for the quarter and the financial year-to-date.
AustralianSuper’s flagship Balanced option (Accumulation), where most members are invested, returned 3.60% for the quarter ended 31 December 2023, while the Balanced option for Choice Income (Retirement) accounts returned 4.04%.
FY24 mid-year investment performance update with Chief Investment Officer Mark Delaney
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Show transcript
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.
End transcript
Navigating macroeconomic uncertainty
After an up-and-down start to the financial year, markets rallied with a strong finish in November and December.Investment markets have been influenced by lingering inflation, mixed economic sentiment and speculation around how central banks will respond with interest rate changes. Listed share and fixed interest markets fell in September and October on concerns around US unemployment and debt levels. But after economic data highlighted falling inflation, listed markets rallied on hopes that interest rates may have peaked.
While the result was a positive end to 2023, the inter-quarter volatility offered a reminder that we still face some economic uncertainty ahead. In the new year, we anticipate ongoing volatility while central banks continue to combat inflation. Market sentiment and performance will likely be driven by earnings growth and the reactions of central banks.
As an active manager, we will closely monitor these economic conditions and respond appropriately. The investment team is always searching for new investments with long-term intrinsic value.
The benefits of diversification
The December quarter performance results demonstrated the benefits of our diversified portfolio.Listed shares were the largest contributor to the Balanced option’s positive performance. After a challenging month in October, listed shares delivered strong gains in November and December. Australian shares outperformed global stocks, in part due to stronger commodity pricing from iron ore and gold.
Fixed interest investments provided a boost to performance, due to higher and more stable interest rates. Meanwhile, the performance of unlisted assets was more modest, with positive contributions from unlisted infrastructure.
Investing in a diversified portfolio is fundamental to our investment approach. As we continue to navigate the current point of the market cycle, each asset class will contribute to the overall risk-return profile of the Fund’s investment options.
PreMixed and DIY Mix option performance
All PreMixed and DIY Mix investment options finished in positive territory for the quarter ending 31 December 2023 and financial year-to-date. AustralianSuper’s flagship Balanced option returned 3.60% for Accumulation accounts and 4.04% for Choice Income accounts for the December 2023 quarter.
The Balanced investment option, over the last 10 years to 31 December 2023, has delivered an average return of 7.94% each year for Accumulation accounts and 8.75% each year for Choice income accounts.
AustralianSuper has a strong track record as a top long-term performing super fund. The Balanced option is ranked #1 over the last 15 years and #2 over the last 10 and 20 years for investment performance1.
Super and TTR Income investment option performance as at 31 December 2023
| 3 MONTHS | FYTD | 1 YEAR | 5 YEARS PA | 10 YEARS PA | |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 4.03% | 3.93% | 10.81% | 9.37% | 8.82% |
| Balanced | 3.60% | 3.49% | 8.96% | 8.05% | 7.94% |
| Socially Aware | 3.82% | 3.14% | 8.59% | 6.74% | 6.97% |
| Indexed Diversified | 5.32% | 4.98% | 12.53% | 8.11% | 6.78% |
| Conservative Balanced | 3.07% | 2.93% | 7.06% | 5.93% | 6.25% |
| Stable | 2.65% | 2.45% | 5.09% | 4.01% | 4.84% |
| DIY Mix Options | |||||
| Australian Shares | 6.74% | 7.54% | 12.81% | 11.47% | 9.01% |
| International Shares | 4.41% | 3.75% | 17.69% | 12.02% | 10.59% |
| Diversified Fixed Interest | 2.36% | 2.75% | 3.20% | 0.91% | 2.65% |
| Cash | 0.99% | 1.96% | 3.54% | 1.40% | 1.76% |
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. For TTR Income accounts, the investment returns are based on crediting rates, which are returns less investment fees and costs, transaction costs and taxes. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
Choice Income investment option performance as at 31 December 2023
| 3 MONTHS | FYTD | 1 YEAR | 5 YEARS PA | 10 YEARS PA | |
|---|---|---|---|---|---|
| PreMixed Options | |||||
| High Growth | 4.46% | 4.36% | 12.04% | 10.33% | 9.77% |
| Balanced | 4.04% | 3.90% | 10.04% | 8.79% | 8.75% |
| Socially Aware | 4.26% | 3.52% | 9.71% | 7.46% | 7.81% |
| Indexed Diversified | 6.00% | 5.57% | 14.51% | 9.12% | 7.76% |
| Conservative Balanced | 3.51% | 3.35% | 8.05% | 6.64% | 7.09% |
| Stable | 3.00% | 2.77% | 5.89% | 4.50% | 5.48% |
| DIY Mix Options | |||||
| Australian Shares | 7.37% | 8.36% | 14.44% | 12.96% | 10.18% |
| International Shares | 4.83% | 4.10% | 19.42% | 13.01% | 11.60% |
| Diversified Fixed Interest | 2.79% | 3.25% | 3.72% | 1.08% | 3.04% |
| Cash | 1.16% | 2.30% | 4.16% | 1.64% | 2.07% |
Choice Income investment returns are based on crediting rates, which are returns less investment fees and costs and transaction costs. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.
Looking ahead
The language and actions from central banks will be a key focus for markets this year. Although higher interest rates have reduced inflation, central banks are cautious – if they cut rates too early inflation could bounce back.
AustralianSuper Chief Investment Officer Mark Delaney explains, “In this higher interest rate environment, we may see weaker economic growth, volatility in investment markets, and more modest returns, as compared to the past 10 years.
“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 also actively seeking out opportunities with long-term value for members.”
Accordingly, the portfolio is positioned to provide a balance of growth potential and downside protection to meet each investment option’s objectives.
References
1. AustralianSuper Balanced investment option as compared to the SuperRatings Fund Crediting Rate Survey – SR50 Balanced (60-76) to 31 December 2023. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
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.
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