Super performance ends on a high

The financial year has come to a close, with most of our options exceeding their performance objectives and ending with positive returns. This is a welcomed sight for members considering in December we witnessed the worst Christmas Eve for the US share market since 1931.

Performance this year was a tale of two halves. The first half (July to December) was doom and gloom, filled with trade wars and negative impacts from US interest rate hikes. Santa delivered coal to investors on Christmas Eve, and we prepared for what looked like a tough 2018/19.

Everything changed on Boxing Day, with this rally continuing to financial year end. This resulted in positive returns across most of our options, with the MySuper Balanced option reaching over 6% and our Indexed Shared options reaching a very strong 12% for the year.

Encouragingly, this strong performance is echoed in the 10-year and since incepation performance. For the last 10 years, our MySuper Balanced option has returned approximately 8% p.a., with the option returning 9.6% p.a. since its inception in 1978.

 “We saw positive growth across our options for the 2018-2019 year, with our 10-year performance now very strong,” said Chief Investment Officer Leigh Gavin.

“While it’s great to see this short-term, or 1 year, growth, super is a long-term investment. And that’s why it’s important to look at those 10-year and since inception figures. Many of our members have or will spend at least 40-odd years in our MySuper Balanced option, so it’s worth highlighting our 9.60% per annum since 1978."

Performance as at 30 June 20191 year10 yearSince inception (1978)
MySuper Balanced option6.06%7.97% p.a.9.60% p.a.


Chatting on performance for the year, Leigh commented that performance in A‑REITs – investments in listed trusts owning commercial property assets – was a surprise.

“This was reflected in our property option, which had very strong performance in the third and fourth quarters – with Australian Listed Property up by over 19% for the last two quarters. This isn’t new for this option, and this isn’t the first time the Property option has delivered large returns in a short space of time.” However, Leigh added “this option’s strong performance has unfortunately often been followed by poor performance periods and it’s important to understand what is in this option, for members currently invested or looking to invest in this option.”

Reflecting on what’s ahead, Leigh said that the next 10 years are likely to be tougher.

“The last ten years have been strong, but this is unlikely to continue forever. We could be looking at an outlook that is low, even negative in some years. Our strategy moving forward will be to continue to diversify – making sure all your super eggs aren’t invested in the same basket – and look strategically about what asset classes, or types of investments, we invest in. We will continue to capitalise on opportunities where we can.”
 

 

With this outlook ahead, is cash going to be king?

With cash usually the ‘conservative’ reaction to possible lows, it is important to reflect on how cash is performing in the current climate.

“Cash may seem like the sensible short-term move, however we encourage members to chat with us first before making a jump into other investment options. From its current starting point (with the RBA official cash rate now at 1.00%), cash is unlikely to keep up with inflation levels,” said Leigh.

“If you are feeling the switch-itch, chat to our financial advisers or our business development managers. As super is more than just looking at what’s happening in the next year, it’s important to chat first, react later.”

Past performance is not a reliable indicator of future investment returns