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Quarterly Investment Update

‘A year of two halves’ is how our Chief Investment Officer at Club Plus Super, Gemma Dooley, has described investment performance over the past financial year.

The first half, from July 2019 into early this year, saw strong returns from global share markets and other growth assets. These returns were spurred on by central banks cutting rates to help avoid a recession and a break in the US/China trade tensions.

US shares were up over 10%, while in Australia, devastating drought and bushfires weighed on markets in December. This resulted in our sharemarket delivering a more subdued return of 3.3% for this 6-month period. In this environment, the MySuper option was up 3.5% for the first half of the financial year – a strong half-year result.

The second half of the year started well for global markets with some reaching all-time highs. But this started to unravel in February, when the coronavirus that started as a problem in China, spread quickly around the world and the death toll rose dramatically.

After an initial plunge global sharemarkets rallied

The widespread lockdown of countries, put in place to try to contain the pandemic, has had huge social and economic impacts for global markets, as reinforced by Chief Investment Officer, Gemma Dooley.

“Sharemarkets initially reacted harshly – some plunging as much as 35% between 20th February and 23rd March, dragging down commodity prices and the Australian dollar.”

The swift intervention of governments around the world in the form of huge stimulus packages, together with a decline in new COVID cases, the easing of lockdown restrictions, and a rebound in economic data over the next few months, substantially lifted investor optimism and sharemarkets rallied significantly.

Global shares rallied, but not enough

From the March lows, global shares rose 40%, domestic shares rose 35% and commodity prices and the Australian dollar also rebounded. But this was not enough to claw back the losses made in March.

For the second half of the financial year US shares were down 3% and Australian shares were down around 10%.

This result saw two very different halves in market performance over the 2019-2020 financial year, as shown below.

We protected your super from further downside with active management and diversification

“In this environment, the MySuper option was down -4.4% but diversification protected it from the extremes of the market crash. Over the full year, the MySuper option has had a small negative return of -1.0%.”

While this is a negative return to members, it is a solid result for MySuper given the wild ride in markets caused by the impacts of the unprecedented global pandemic.

To put it into perspective, during the global financial crisis in 2008 and 2009, the return for the financial year for the median default option was -12.5%.*

Strong, long-term performance over 10 years

Super is a long-term investment, so financial year returns by themselves are almost irrelevant in the big picture.

Gemma states that Club Plus Super continues to be well-placed to deliver significant returns into the future:

“The long-term returns of the MySuper option remains strong with the 10-year period ending 30 June 2020 returning 7.2% p.a.

Interestingly, compounding at a rate of 7.2% over 10 years would have seen a member’s super balance double over the period, and this doesn’t include any contributions along the way.

For other investment options returns and performance refer to super or pension.

Important lessons about long-term investing from the last 12 months

According to Gemma, the lessons include:

  1. A well-diversified portfolio can protect members from wild market swings.
  2. Don’t jump at shadows – when it comes to investing, ignore the headlines and all the short-term noise and and remember that super is a long-term investment.
  3. Again, history has shown us that markets rebound from seemingly dire events that rattle investor confidence – however there could be further market corrections ahead.

For more important lessons from the last twelve months, watch the investment update video.

Where to from here?

No-one really knows how long the pandemic will take to get under control around the world or what the true lasting impact on the global economy will be. 

On the one hand, there have been encouraging developments in containing the virus and in creating a vaccine. However, in some countries the number of new cases continues to rise and in others new outbreaks are occurring, like in NSW and Victoria.

While there is this uncertainty around the pandemic, market volatility is likely to remain elevated. We are also yet to see the full collateral damage it has caused in terms of corporate failures, high unemployment and weak growth and these are expected to weigh on the economy in the months and years ahead.

Looming in the background are rising tensions between the US and China, as well as social unrest and a rapidly approaching US election in November.

Keep calm and follow your goals

The best thing members can do amid all this uncertainty is for Club Plus Super (CPS) to actively manage your super. CPS draws on some of the world’s best investment managers and has an experienced asset consultant to help them do this. CPS will continue to closely follow global developments and will make investment decisions based on strong research and a very disciplined investment process.

Need more information?

If members have any questions about their super, they can contact one of the CPS team. There are many things members can do right now to try to bridge the investment impact of COVID-19 on their super balance.

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 and returns are not guaranteed. Market data sourced from FactSet and SuperRatings. All information was correct at the time of filming: 24 July, 2020. *SuperRatings Credit Rate Survey 30 June 2009, accessed via SMART 23 July 2020.