Positive returns in difficult times

Investments
29th July 2020

Against the backdrop of COVID-19, we take a look at our investment returns for 2020 and what’s on the horizon for financial markets.

CareSuper’s Balanced (MySuper) investment option has delivered a return of 0.22% for the financial year to 30 June 2020. This result is well above the median according to SuperRatings, which was -0.82%.*

According to Chief Investment Officer Suzanne Branton, ‘We have been through an extraordinary year – our daily lives, the world economy and financial markets have all been affected by the coronavirus pandemic’, Branton said. ‘To achieve a positive return given the turbulence we’ve seen this past financial year is a good outcome for members.’

‘While this year’s returns are much lower than previous years, it’s important to remember that it follows several years of strong returns’ added Branton.

TOP PERFORMER OVER THE LONG TERM

Despite the small positive return this year, the long-term returns for our Balanced (MySuper) option remain strong – delivering 8.43% per year, on average, over the past 10 years.

CareSuper’s Balanced option (for both super and pension members) was a top performer over the last 5, 7, 10 and 15 years.** According to independent ratings agency SuperRatings, our MySuper Balanced option is ranked the number 1 fund over 20 years, returning an average 7.48% per year.*

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

THE KEY DRIVERS BEHIND OUR RETURNS

After a volatile start to 2020 for financial markets created by the COVID-19 pandemic, CareSuper’s Overseas shares investments returned over 3.5% for the financial year. This was predominantly led by the US share market, which, from late March, rebounded as quickly as it fell and recovered much of its losses.

Australian shares on the other hand didn’t fare so well and still lost around 6.5% for the financial year. The energy sector was the weakest performer, on the back of a sharp fall in oil prices. In contrast, healthcare and technology were the best performing sectors, as they tended to benefit from COVID-19 related shutdowns.

Our Fixed interest investments (made up of global and Australian indices) had reasonable returns of 2.4% while our Cash investments had lower returns of 1.1% as the RBA cut the cash rate to 0.25% in March.

Despite the plunge in interest rates and bond yields, our Direct Property investments delivered a modest return of 1.7% for the financial year. This was mainly due to the increased vacancies and depressed rent in retail and commercial sectors as a result of the coronavirus-driven shutdowns. These events meant write downs in property values, particularly in the retail sector.# In stark contrast, listed Australian Real Estate Investment Trusts (AREITS) – which CareSuper does not invest in – fell around 21% over the financial year.^ 

KEY LESSONS FOR INVESTORS

The key lesson from the past financial year is the importance of maintaining a well-diversified portfolio.

‘The extraordinary events of the past year highlight the value and importance of our more defensive investment approach and certainly showed the power of diversification,’ said Branton.

‘Our active investment strategy ensures that we diligently select investments – avoiding those that are expensive and assessing investments that might be facing greater risks.’

‘The diversification in our Balanced option ensures that members can remain invested through different market cycles and benefit from any recovery of share markets and the broader economy.’

ECONOMIC RECOVERY WILL TAKE TIME

While share markets have bounced back strongly in the last quarter of 2020, Branton says the fund remains cautious in its outlook.

‘We know economic recovery will be determined by coronavirus trends and stimulus measures will fade at some point. The near-term backdrop is one of high unemployment, the upcoming US election, and global tensions’, she explained.

‘And while the future remains uncertain, with more volatility on the horizon, sticking to our investment strategy and maintaining our diversified, active approach will be critical.’

‘We understand how challenging these times are for our members – but rest assured that we are well placed to navigate such market conditions and to help members achieve their best possible retirement outcomes.’

If you have any questions please contact us.  

 

* SuperRatings Fund Crediting Rate survey  SR50 Balanced (60-76) Index – June 2020.

** SuperRatings Fund Crediting Rate survey  SR50 Balanced (60-76) Index – June 2020 and SuperRatings Pension Fund Crediting Rate Survey - SRP50 Balanced (60-76) Index - June 2020.
# Asset class returns shown are based on the super options.
^ Source: FactSet.

This article contains general advice, not taking into account your objectives, financial situation or needs. Before acting on this advice you should determine if it is appropriate for you. Before acquiring a product, first read its product disclosure statement. Some products and services offered on this website are provided by third parties. The trustee is not responsible for the products or services, views or actions of these third parties. Terms and conditions may apply which should be obtained from the third parties direct. The trustee does not accept liability if loss or damage is incurred from the acquisition of third party products or services. Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments.

CARE Super Pty Ltd (Trustee) ABN 91 006 670 060 AFSL 235226 CARE Super (Fund) ABN 98 172 275 725.