- The MySuper investment option returned 15.9% for the 2020/21 financial year.
- All member investment options produced strong positive returns for their risk profile.
- Most accumulation options are significantly outperforming their long-term return objectives for the 10 years ending 30 June 2021.
- The MySuper investment option is outperforming its Your Future Your Super benchmark.
- We ensure that our investments options are well diversified across a range of different types of investments, referred to as asset classes.
As we enter the new financial year, Coronavirus is still dominating the headlines, with a lockdown across greater Sydney over the last month once again disrupting our workplaces and our lives. We hope you are staying safe in these challenging times.
This investment update will:
- discuss the financial year returns of our member investment options as well as their long term returns against objectives
- look back at market performance over the year and highlight some of the investments that have helped deliver the strong returns for members
- briefly consider what may impact markets for the year ahead.
Highest return in 14 years
Hopefully when you open your Annual Statement next month, you’ll be pleasantly surprised by the returns applied to your super balance over the last year. Remarkably after the tumultuous events of 2020, the MySuper option returned 15.9%, the highest return over the last 14 financial years.
All member investment options produced strong positive returns for their risk profile. This is in stark contrast to lacklustre returns for the prior financial year when the initial outbreak of COVID19 rattled investment markets. As expected, the options with the highest shorter-term risk – those that invest 100% in the sharemarkets – produced the highest returns over the last 12 months, not far off reaching an impressive 30% for the year.
Strong long-term returns
Given that super is a marathon and not a sprint, these annual returns have helped boost the 10-year results for all member investment options. Six out of seven accumulation options significantly outperforming their long-term return objectives for the 10 years ending 30 June 2021.
We are very pleased to report that our MySuper option passed the recently legislated and very important Your Future Your Super benchmark. The regulator APRA will be reviewing performance versus these benchmarks on an annual basis to ensure that members are not stuck in poorly performing super funds. This is a strong endorsement of our investment strategy over time.
Contributing to the great returns for the year have been surging equity markets around the world. Markets at all-time highs seemed implausible a year ago, but investors appear to have shrugged off pandemic risks and bet on a sustained economic recovery.
In Australia, the ASX200 index climbed 28%, the best financial year return in its history. While the broader All Ordinaries with a longer history, was up 30% to a record high level. This was the biggest rise for a financial year since the market euphoria prior to the Black Monday sharemarket crash in October 1987. The strength in the market has been driven by the effectiveness of fiscal and monetary stimulus in driving growth and securing improvement in the job market, with employment back at record highs. In a further boost for the Australian economy, stronger global growth has increased commodity demand and prices, with iron ore doubling over the last 12 months. This helped the Aussie dollar appreciate by 10 cents against the US dollar over the year which is another sign that the Australian economy is going well. The crude oil price has also increased significantly as I’m sure you’ve noticed when filling up your car with petrol recently.
Elsewhere in the world the equity markets were up 36% in the US (US Dow Jones), up 31% in Japan (Nikkei), up 18% in the UK (FTSE) and up 26% in Germany (DAX).
While the Australian equity market has provided the tailwinds for strong performance for our member investment options, the five specialist Australian equity investment managers (DNR Capital, Perpetual, Solaris, Tribeca, Vinva) were collectively able to add value above the market returns. This is a great result and shows the benefit of active management over passive. These managers have been carefully chosen to look after about a quarter of all member money. They achieved these strong returns by using their specialist skills and expertise to identify the companies that have been able to capitalise on the themes resulting from the pandemic. These include working from home, commodity demand for infrastructure development, health and wellness/medical, home renovating and building, online shopping and consumer spending on cars.
Investment managers capitalise on consumer demand
|Increased demand||Companies or stocks held|
|Online shopping and payments||Afterpay (+94%), Premier Investments (+66%)|
|Household and home office furniture||Nick Scali (+81%), Harvey Norman (+55%)|
|Audio visual technology||JB Hifi (+18%)|
|Home building and renovations||Reece (+157%), Fletcher Building (+104%)|
|Automotive||Eagers Automotive (+145%)|
|Resources demand||Pilbara Minerals (+523%), Lynas Rare Earths (+199%)|
Looking forward the continued global economic recovery and the outlook for investment markets will be dominated by the path of COVID19 and how quickly it can be controlled. It’s fair to say that the recovery will not be a straight line. The bad news is that countries are still experiencing virus outbreaks and new variants are emerging, but the good news is that effective vaccines are being distributed across the globe. Risks to controlling the impact of COVID include slow vaccine take up and vaccine shortages, inadequate support measures when outbreaks occur and extended delays in the re-opening of foreign borders. In addition, non-COVID risks to the forecast include tensions with China and a spike in inflation. On the positive side we see catalysts for a robust recovery as:
- low interest rates
- a much quieter US under Biden
- company earnings expectations still being revised up
- continued stimulus and
- massive pent-up consumer demand on the back of record household savings around the world.
Like usual there’s lots of noise that could worry us but we turn all that down and focus on the long term, ensuring our member investment options are well diversified across a range of different types of investments. It’s impossible to predict which investments will be the winners or losers in this market environment so we don’t put all our eggs in one basket.
This 2020/21 financial year investment update is from Gemma Dooley, Chief Investment Officer at Club Plus Super.
Important information about investments: Investment performance is after investment fees and taxes, but before the deduction of administration fees. Investments can go up and down. Past performance is not necessarily indicative of future performance. Index returns presented are net returns. All stock returns presented are price returns. Source Factset.