ANZ Smart Choice Super report: September 2018

14 November 2018

Returns have been boosted by positive sharemarkets in the past 12 months, explains Mark Rider.

In the past 12 months, strong economic performance in world markets has boosted investment returns.

In brief

  • From October 2017 to September 2018, lifestage investment options had strong returns.
  • US economic strength continues to drive global growth and sharemarket performance.
  • Super is a long-term investment, so take this into account when viewing your returns.

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

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 September 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 so there is no performance data available over three and five years yet.

Investment returns for lifestage funds – which most ANZ Smart Choice Super members are invested in – tracked strongly across the 12 months to September 30, 2018 with four of the funds delivering returns greater than 10 per cent.

Our lifestage members are in investment options based on their decade of birth, as you can see in the table above. 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) make up a larger share as members age.

As you can see in the table, returns for the past 12 months ranged from 11.47 per cent for those born in the 1990s, through to 6.16 per cent for the more conservative 1940s investment option.

(Keep in mind that 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 steadily track higher.)

In the ‘1 year’ column you can see how much your fund grew in the period from October 1, 2017 to September 30, 2018. The ‘3 months’ column shows returns for the quarter to September 30, 2018. In the last column, ‘5 years’ you can see the average annual returns in your lifestage option for the past five years.

Despite noise, Australian and world economy is performing well

One of the main reasons investments have performed well in the past 12 months is because the strong US economy has driven double-digit returns in the US sharemarket. Good corporate earnings there have also been supported by President Donald Trump’s federal tax cuts.

However, risks to growth from the trade war with China; and a gradual raising of interest rates in the US have, since the end of September, led to a correction in sharemarkets as investors factored in lower earnings from companies.

In Europe, while political dramas have overshadowed positive economic news in the past year, sharemarket returns have been positive. The European Central Bank has announced it will keep interest rates on hold until at least the middle of 2019, giving investors some certainty.

While China’s economy is cooling modestly, it is still growing strongly relative to other large economies and recent action by its central bank will help will help manage it as it continues to cool, by cutting the amount of credit available.

In Australia, the resources sector has been supported by strong commodity prices and the weaker Australian dollar.  Sentiment towards banks is being impacted by the royal commission, but the economy has performed well, despite the overlay of a challenging political backdrop. House prices and dwelling construction have eased, but this is being offset by some state governments running substantial infrastructure project programs, particularly in New South Wales. The Reserve Bank of Australia is likely to keep interest rates on hold at a low level for some time yet.

Looking ahead, ANZ’s chief investment office expects economic growth to remain on trend with what we’ve seen so far this year until 2019, with perhaps some slowing after that. Sharemarket returns are likely to be weaker in the period ahead.

As always, consider that your super is most likely a long-term investment, so staying the course should help to balance out the highs and lows of the sharemarket as you travel toward your retirement.

Snapshot of market performance: Click to view (infographic)   

I’m in the choose your own investment mix. How did my funds fare?

All the ANZ Smart Choice low-cost options saw positive returns for the 12 months ending September 30, 2018. As shown below, the best-performing investment option was the ‘international equities (unhedged)’ option, which delivered a healthy 18.58 per cent return.

This was followed by the ‘global smaller companies’ option which returned a strong 17.34 per cent for the year to September 30, 2018, and the ‘Australian equities’ option returned 13.09 per cent.

For those in multi-asset options, the annual returns ranged from 4.95 per cent for the conservative fund through to 9.12 per cent for the growth option.

ANZ Smart Choice Super Choose Your Own Investment Mix Performance

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 September 30, 2018 p.a. (per annum). The ‘Australian fixed income’ investment options started February 18, 2017 and therefore three and five-year performance data is not yet available. Similarly, ‘international equities (unhedged)’ and the ‘global smaller companies’ started 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. Past performance is not a reliable indicator of future performance.

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.)

How is your super tracking?