AustralianSuper Warns of ‘Low or Even Negative’ Returns

Despite healthy 8.67% annual return, CIO Delaney cautions not to focus on short-term results.

AustralianSuper, Australia’s biggest pension fund with A$165 billion ($115.1 billion) in assets, returned 8.67% for the fiscal year ending May 31, surpassing its projections that the median fund return would be 7.1%. 

However, despite the “outstanding result” AustralianSuper CIO Mark Delaney cautioned investors not to focus on short-term results and warned them not to expect similar strong results in the future.

“We know that at some point in the future the fund will experience very low or even negative returns,” Delaney said in a release. “As we start to get closer to the end of the current economic growth cycle, members need to prepare themselves for that and not react to short-term fluctuations in returns in the future.”

For the financial year to May 31, AustralianSuper’s “Balanced” option was the top-performing fund over 10 and 15 years, and in the top 10 over all time periods.

The balanced option has returned 10.72% a year over three years, 9.76% a year over 10 years, and 8.25% a year over 15 years. AustralianSuper said that A$50,000 invested with the Balanced option from July 2009 would now be worth A$126,921.

Delaney said underlying global political and economic uncertainty had created a complex investing environment in 2018.

“There were some tough months during the year and at times it looked like we would see relatively subdued returns,” he said. “However, there was resilience in infrastructure and property markets while falling interest rates also meant fixed interest did well.”

Delaney added that foreign currency rising against the Australian dollar also helped increase returns from overseas assets with “both domestic and international equities having a strong finish to the year.” He also said that long-term performance was still the most important consideration for members when it comes to their superannuation.

“Most members are usually better off sticking with their long-term strategy, providing it is right for their goals and circumstances,” he said.

AustralianSuper manages retirement savings on behalf of more than 2.3 million members from approximately 280,000 businesses.

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