Long term returns remain strong despite a volatile year

Despite challenging conditions over the last financial year, we worked hard to minimise losses and deliver above average returns for our members. Our Balanced (MySuper) option is a top performer over 1, 3, 5, 7, 10 and 20 years.*

HOW WE PERFORMED

An unprecedented number of global developments and events has seen investment markets experience sharp periods of volaltity during 2022. And in what has been a very different financial year compared to last year, returns for our MySuper Balanced option recorded a modest fall of -1.68% According to SuperRatings, this compares favourably to the median super fund return of -3.44%.*

While we never like to see balances decline, even by a very small amount, it’s important to put the year into context. This year’s result follows a record 17.49% gain in FY21and was only the third time in CareSuper’s history where the Balanced option has experienced a negative annual return. The last time was in the Global Financial Crisis and then the declines were quite substantial throughout the industry.

View the latest returns for all investment options for super and pension.

HOW WE COMPARE OVER THE LONG TERM

Despite the small negative returns this year, our Balanced (MySuper) option continues to outperform over the long term. According to SuperRatings, our Balanced option has delivered an average return of 8.72% per annum over the past 10 years, making CareSuper one of the top performing funds in Australia.* Returns for our pension members were slightly higher.

This is a good reminder that super is a long term investment. So while investment markets can be unpredictable over the shorter term, they typically recover and smooth out over the longer term.

THE KEY DRIVERS THAT EFFECTED RETURNS

The financial year 2021/22 was a year of two halves for investment markets. From July 2021 share markets began delivering strong returns, benefiting from government support schemes, vaccine rollout, the opening up of the global economy and low interest rates.

However, from January 2022 world share markets reacted to inflation and interest rate fears, and the ongoing war in Ukraine. In response to persistently high inflation, central banks in various countries around the world including the US and Australia were forced to aggressively raise interest rates. This wiped out the strong performance of the first half of the financial year and led to further market falls in second half.

Overseas shares in developed markets fell by -6.52% for the year to 30 June 2022, with emerging markets the hardest hit, returning -18.43%. Australian shares also fell sharply, delivering a return of -6.78%. Of the major industry sectors, only energy and utilities shares produced gains, while the technology, materials and consumer discretionary sectors posted the greatest falls.

Economic impacts from interest rate rises and increasing inflationary pressures have also impacted the normally ‘safe’ bond markets with global fixed interest markets returning -9.33% and Australian fixed interest returning -10.51% for the same period.

Despite these significant falls in major financial markets– how was CareSuper able to contain the impact on our options to small declines?

Our Balanced (MySuper) option’s exposure to property, infrastructure, and private equity investments which have performed strongly over the year, has helped to cushion the impact from weak share and fixed interest markets in our diversified options.

CareSuper’s Chief Investment Officer, Suzanne Branton confirmed the Balanced (MySuper) option’s comparatively strong performance is testament to the fund’s dual-purpose active investment approach. “Our strategy combines both a growth agenda with downside protection to better manage asset price fluctuations in volatile markets. This provides members with the confidence that they’ll be able to recover any lost ground more quickly” she said.

“We aim to smooth out some of the highs and lows of share market volatility by ensuring our diversified options include a range of alternative investments, in addition to some of the more traditional asset classes like shares, property, bonds and cash.

“The benefits of diversification have shone through and, with higher interest rates and inflation expected to persist, CareSuper’s dual-purpose active investment approach will become even more valuable for members.”

THE OUTLOOK

After more than a decade of strong growth, our outlook suggests we’re entering a period of weaker economic growth, and that we may see lower returns than in previous years.

As the economic cycle progresses and markets respond, we will continue to manage downside risk and look for long-term investment opportunities.

Our members can rest assured knowing that our focus remains on delivering the best financial outcomes for our members over the long term but in a less volatile way.

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CareSuper’s performance figures shown are net of investment fees, indirect costs and tax and have been rounded to two decimal places. Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments.

* SuperRatings Fund Crediting Rate survey SR50 Balanced (60-76) Index – June 2022.