ANZ Smart Choice Super report: 2017-18

25 July 2018

Your investments had positive returns in the past year despite unsettling political ‘noise’, explains Mark Rider.

In brief

  • Lifestage options recorded strong results in the 12 months to the end of June 2018.
  • While turbulent politics and trade wars impacted sharemarket returns, the global economic environment remained solid.
  • Super is a long-term investment, so take this into account when viewing your returns.

There has been lots of global political ‘noise’ in the past few months, causing investor confidence to falter a little and at times this reduced the value of shares, where a large portion of most people’s superannuation is invested.

I’m in a lifestage fund – how did my investment option fare?

Our lifestage members belong to investment options based on their decade of birth. In these investment options, younger members’ savings are mostly allocated to ‘growth assets’ (higher risk investments with higher potential returns), while ‘defensive assets’ (more stable, lower return investments) start to make up a larger share as members age.

As you can see in the table below, returns for the past 12 months were strongly positive for ANZ Smart Choice Super members in lifestage options. These ranged from 10.08 per cent for those born in the 2000s, through to 5.33 per cent for the more conservative 1940s investment option.

Before we get into more detail, a quick reminder: it’s always a good idea to have a long-term view on your super – it goes up and down to some extent, but in the long-term tends to track steadily higher.

Note: Returns quoted use the unit price which is calculated using the net asset values for the relevant month end. Please note that all returns are after the deduction of investment fees. Reporting data is to June 30, 2018 (p.a. = per annum). Past performance is not a reliable indicator of future performance. The inception of the 2000s fund was on February 18, 2017 and therefore there is no performance data available for three and five years.

In the ‘1 year’ column you can see how much your investment option grew between July 1, 2017 and June 30, 2018.  The ‘3 months’ column shows returns for the second quarter of this year (April to June). In the last column, ‘5 years’, you can see the average annual returns for lifestage options over the past five years.

Market update

So why have your investments performed at this level?

One of the main reasons markets have performed well in the past year is that the US economy has been strong, even though there’s been some fears around the US central bank continuing to slowly raise interest rates to keep inflation in check. President Donald Trump’s tax cuts and greater spending are boosting business in the US, but ‘trade war’ tariffs have, at times, worked in the opposite direction.

In Europe, Brexit and political turmoil in Italy have impacted markets. However, despite the noise, the economic environment remains solid with company earnings increasing, supporting European sharemarkets.

Since the global financial crisis the Chinese government has deftly navigated its economy to a soft landing. The economy’s main engines have changed over the past decade, with growth increasingly driven by the consumer and the services sector and less so by construction and exports. The latter, nevertheless, remains critical for the Australian economy, particularly our resources sector. While we expect this to continue in the year ahead, risks on the horizon from a potential trade war with the US warrant caution.

While Australian business confidence is at a high level, low wage growth has held back spending somewhat, even though more of us are employed. With inflation remaining low, the Reserve Bank of Australia is likely to keep interest rates on hold for some time yet.

Looking ahead, ANZ’s chief investment office expects lower sharemarket returns as economic growth slows, US interest rates move higher and political risks remain. But prospects remain good for future growth and the sharemarket continues to offer superannuation investors better prospects for higher returns than bonds or cash.

Snapshot of market performance: Click to view (infographic)   

I’m in the Choose Your Own Investment Mix. How did my funds fare?

As you can see below, all ANZ Smart Choice Super members who chose their own investments saw positive returns for the 12 months ending June 2018.

The best-performing investment was the Global Smaller Companies’ option, which delivered a 16.85 per cent return. This was followed by International Equities (unhedged) at 13.66 per cent and then Australian Equities at 12.42 per cent.

For those in multi-asset options the annual returns ranged from 4.29 per cent for the Conservative option through to 8.35 per cent for the Growth option.

Note: Returns quoted use the unit price which is calculated using the net asset values for the relevant month end. All returns are after the deduction of investment fees. Reporting data is to June 30, 2018 (p.a. = per annum).  Past performance is not a reliable indicator of future performance. Note the Australian fixed income fund’s inception was on February 18, 2017 and therefore the three and five-year performance data is not available. Similarly, International equities (unhedged) and the Global smaller companies started on May 25, 2015 so the five-year performance data is not available. The Global small companies investment option is not available to members of ANZ Smart Choice Super and Pension.

Members of ANZ Smart Choice Super for employers and their employees can access the latest returns across the full suite of investment choices online or by visiting the ‘Investment portfolio’ page via their ANZ Smart Choice Super account in ANZ Internet Banking.

(Note: The above investment returns are not applicable to QBE members. These members can access their individual returns via ANZ Internet Banking.)

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