Super spotlight...investment returns

Posted: 28 November 2019

 

In a series of articles, we'll put the spotlight on some of the investments we hold and how these support our investment strategy and generate returns for members. This first article takes a look at investment returns.

Investment returns are just one aspect of a super fund but some of the most common questions we get from our members relate to how their super is invested. What types of assets Group Super invests in? How those investments translate into returns? What should members consider when choosing investment options?

Investment return wrap-up for October

Here’s a snapshot of returns for our Accumulate Plus Balanced (MySuper) investment option as at 31 October 2019, calculated after relevant asset-based fees and taxes have been deducted:

  • 1 year = 10.3%
  • 5 years = 6.5% p.a. (compared with an investment objective of CPI+2.5% p.a.)
  • 10 years = 7.6% p.a.
  • 15 years = 7.4% p.a.

See returns for our other investment options.

Are all returns created equally?

Returns vary across different super funds and investment products, particularly for diversified investment options that invest across a pre-mixed range of asset classes, such as our Balanced (MySuper) option. Returns may be different even if the options seem to be broadly invested in the same sorts of assets.

Directly comparing or ranking returns for Fund A with Fund B can be common, but even comparing returns over the same time period may not be as straight-forward as it seems.

An important factor in generating returns is the amount of investment risk different funds may take to achieve a return. Investment risk can influence absolute return figures over any given time period, but also the consistency of returns over successive time periods.

For example, investment assets like cash have low levels of investment risk. Returns tend to be relatively stable over time, but longer-term returns tend to be lower on average. On the other hand, assets like shares may produce higher average returns over the longer term, but over shorter periods there’s greater potential for returns to rise and fall, and by bigger amounts.

Depending on their individual investment objectives, different funds may be prepared to take different levels of risk to achieve those objectives. This will affect the types and the relative weighting of assets that the investment option invests in.

Our strategy focusses on smoother long-term returns and meeting investment objectives

Our investment strategy aims to achieve long-term sustainable returns, but we also try to achieve this by limiting how much we may be exposed to potential market downturns. For our diversified investment options, this means we generally have lower exposure to assets that can be more volatile in the shorter-term, such as shares.

When share market performance is strong, such as the last few years, a strategy like ours may not achieve the highest returns in absolute figures compared with other funds that may have higher share exposure. Similarly, in a market downturn, our returns are less likely to be the most adversely affected. This approach helps us target a smoother return experience over the longer term.

We believe this makes us more likely to consistently meet the objective we set for each option, which is simply the overall return we target for the option and the timeframe we aim to achieve it. We do this to help members have more realistic expectations when choosing how to invest your super and understanding what their likely outcomes might be at retirement.

Important note: Please remember that investment returns are not guaranteed and may be positive or negative. Past investment performance is not a reliable indicator of future performance. The information in this article is general information only and doesn’t take into account your individual objectives, financial situation or needs. You should consider the information and how appropriate it is to your own objectives, financial situation and needs before making decisions about a product. You can obtain the product disclosure statement for Accumulate Plus from oursuperfund.com.au/pds. You should seek professional advice tailored to your personal circumstances from an authorised financial adviser.

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