A positive year for members
It’s been another good year for both super and pension members with our Balanced option delivering it’s tenth consecutive year of positive returns.
CareSuper’s other diversified options also delivered positive returns for the year. The best performers were those options with higher allocations to growth assets such as shares, direct property, infrastructure and private equity.
Fixed interest also had a good year – particularly over the second half as interest rates fell. Cash returns were relatively modest, and members invested in options with a high allocation to this asset class (Capital Stable, Capital Guaranteed and Cash1) received more subdued returns.
You can see the returns for all our investment options across the various time frames here.
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How we compare long term
According to the SuperRatings survey, our Balanced option was the top performer among comparable funds, over 20 years to 30 June 2019 with an average return of 8.13% per annum. It also ranked amongst the top 10 performing funds over 5, 7, 10, and 15 years.2
And for our pension members, who mainly have their money invested in our Balanced and Conservative Balanced options, there's more good news. Both of these options were also among the top performers over similar long-term time frames.3
CareSuper’s Chief Investment Officer, Suzanne Branton says ‘Our historically strong returns come down to our proven investment philosophy, which is founded on a belief in active management and the genuine long-term horizon of super. We don’t invest for short-term trends in the market but remain focused on what’s going to make the biggest difference to our members’ retirement savings, and that’s the long-term net returns’.
The key drivers behind our returns
While the 18/19 financial year ended with share markets at all-time highs, investment markets were quite volatile during the year, with the final quarter of 2018 being particularly weak.
The key drivers of volatility were concerns about the trade dispute between China and the US, as well as the concerns in the first half of the year that US interest rates would rise too quickly.
While these issues were a catalyst for share market weakness at various stages through the year, the US central bank changing its views from further interest rate rises to potential cuts meant that global share markets were able to recover quickly.
Overseas share markets as measured by the MSCI All Country World ex Australian Index (AUD)4 delivered a return of 10.90% for the financial year to 30 June 2019, with US equities leading the way.
The investment landscape in Australia also showed resilience in the face of weak economic growth, a banking Royal Commission and a cooling property market. Australian share markets climbed 11.42% over the year, lifted by strong iron ore prices, the Liberal Party’s federal election win and the Reserve Bank’s cut to interest rates.
How we’re responding
While share markets have bounced back strongly in the second half of 18/19 financial year, we remain cautious in our investment outlook. Despite the US Central Bank and the Reserve Bank of Australia lowering interest rates to support economic growth, key risks continue to exist. US 2020 elections, US-China trade tensions, Brexit and a slowing China, are just some of the ongoing uncertainties that have the potential to negatively impact investor confidence.
Our active approach to investing focuses on delivering strong and consistent returns over the long term. We achieve this by taking advantage of opportunities to add value, while also reducing risk.
‘Our ability to navigate different market environments, and do that actively, is the key to our long-term outperformance,’ says Branton. ‘And in some environments our active approach is focused on controlling and managing risk, and that is what we and our investment managers have been doing through the year. And although this means that we will not always benefit as much from any short-term share market growth, it also means that we are better prepared should a significant downturn occur.
‘So, reflecting on what’s been 10 years of fairly consistent share market gains, and as we now observe quite elevated asset prices and lower interest rates, it’s appropriate for us to continue to manage members’ investments in a prudent and proactive manner.
‘There’s also more to financial markets than just shares’, Branton adds. ‘So, even if shares continue to rise in the short term, diversification means that we can continue to add value for our members through our investments in a range of assets such as infrastructure and property in Australia and overseas. We saw some great returns from these types of investments during past twelve months.
‘As always, we’ll continue to adhere to our consistent approach with the aim of delivering real growth over time while also protecting savings’.
Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments.
1 Prior to 1 August 2019, this option was known as Capital Secure. Only the name has changed – its objectives and features remain the same.
2 SuperRatings Fund Crediting Rate Survey - SR50 Balanced (60-76) Index, June 2019
3 SuperRatings Pension Fund Crediting Rate Survey - June 2019. Various indices.
4 The benchmark used is a composite of the hedged and unhedged MSCI All Country World ex-Australia indices to reflect use of currency hedging in managing the option.