Caresuper investment update - March quarter 2021

INVESTMENT MARKETS – A SNAPSHOT

Share markets continued to rise in the March quarter, helping to generate strong returns for CareSuper’s share-based investments. However, with interest rates at virtually zero or negative around the world, returns for our Fixed Interest and Cash investments remain challenging.

WRAP OF PERFORMANCE

Our MySuper Balanced option returned 2.85% for the quarter and was up 11.74% for the financial year to the end of March 2021 – a pleasing result. 

Overseas and Australian shares were the key drivers of performance over this quarter. Solid returns from our private equity, credit, and direct property assets also added to gains. With interest rates around the developed world sitting at virtually zero or negative, Fixed Interest and Cash options yielded minimal returns for the quarter. 

Our longer-term returns remained strong with the Balanced (MySuper) option delivering returns of 8.54% per annum, over the last 10 years to the end of March. This is well ahead of the industry median return of 7.59% per annum.*

Because they don’t pay tax on investment earnings, pension members’ returns were slightly higher. You can see the performance of all our investment options over various time periods set out in the performance table.

WHAT HAPPENED IN MARKETS

The March quarter saw strong global share markets with the MSCI World Index (in Australian dollars) returning 6.3% to post an extraordinary return of more than 50% since March last year, when markets first started to recover from the COVID-19 shock. 

Key to this extraordinary recovery has been the sustained stimulus from governments around the world and the policy measures adopted by central banks to keep interest rates at all-time lows throughout the pandemic. The passing of the US$1.9 trillion American Rescue Plan in March – one of the largest stimulus packages in the history of the US, also renewed confidence in global growth prospects. 

High vaccination rates in key economies such as the US and UK have also contributed to the increasing economic optimism.

The Australian share market (ASX 300 index) also built on the previous quarter’s gains with a return of 4.2% over the March quarter, and around 38% over the year ending 31 March 2021. This performance was largely led by the surge in bank and telecommunication stocks. 

By contrast, fixed interest securities were negative over the quarter given the sharp rise in yields. The US 10-year bond yield increased from 0.9% to 1.7% over the quarter while its Australian equivalent went from 1.0% to as high as 1.9%, a level not seen since early 2019. Expectations of higher inflation and growing confidence in the global economy drove long term bond yields higher, despite indications from the world’s major central banks that official interest rates would remain at their current lows for some time.

The returns on Cash also continued to be flat as the Reserve Bank of Australia (RBA), kept the official cash interest rate at a minimal 0.1% p.a. 

The Australian dollar fell by 1.25%^ against the US dollar over the March quarter but rose against a number of other major currencies.

LOOKING AHEAD

With only weeks remaining to the end of the financial year, it seems likely that share markets will have seen one of the strongest growth years on record. Despite this, we remain cautious in our outlook.

According to Chief Investment Officer, Suzanne Branton, ‘While this is a pleasing result, we are conscious that markets reflect a great deal of optimism and shares are arguably expensive, so our diligent approach to selecting the best investments while focusing on controlling risk will be even more critical in the future’. 

‘Active management and diversification will continue to define our key long-term investment strategy and help us to deliver strong stable returns for our members’, Branton added.

* SuperRatings Fund Crediting Rate survey SR50 Balanced (60-76) Index – March 2021.
^ Source: Bloomberg
CareSuper’s performance figures shown are before tax but net of investment fees 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.