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Investment returns: growth assets deliver

Mark Rider reports on how your super performed during the December quarter.

Members invested in the 1990s and 1980s funds saw the biggest returns in their superannuation in the last quarter of 2016. These are the ANZ Smart Choice Super lifestage funds where investments are most focused on the sharemarket and similar “growth” assets, which performed well in the past quarter.

Most Smart Choice funds recorded reasonable results, benefiting from the general surge in confidence and strong returns from growth assets, particularly shares. But for those older members, returns were lower as their investments are more ’defensive’, focused on investments such as fixed-income assets (e.g. bonds). (Bond returns were negative in the quarter due to market expectations of better global economic growth and higher inflation.)

As you know, most Smart Choice super members are allocated into funds according to their decade of birth. You can see how each fund performed in the past quarter in the ‘3 months’ column in the table below. The 3 year performance (net of fees and taxes) is also ahead of their respective CPI objectives.

 ANZ Smart Choice lifestage fund performance (%)

Option 3 months 6 months 1 year 3 years (p.a)
1940s -0.09 0.90 3.49 4.25
1950s 0.86 2.41 5.23 5.71
1960s 1.82 4.21 6.69 6.49
1970s 2.62 5.60 7.90 7.03
1980s 3.06 6.28 8.43 7.39
1990s 3.13 6.40 8.52 7.44

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 December 31, 2016. PA = per annum. Past performance is not a reliable indicator of future performance.

The 1940s portfolio posted a negative return of 0.09 per cent in the quarter, reflecting its larger allocation to fixed-income assets. By contrast, the 1990s portfolio performed strongly returning 3.13 per cent, reflecting its very large allocation to growth assets. The 1970s portfolio, with a roughly 80/20 growth/defensive split, returned 2.62 per cent.

Those Smart Choice members that opted to choose their own investments can see results for different classes of assets below. In the past quarter we can see that shares (equities) in Australia and overseas performed quite well, while property and fixed interest didn’t.

Choose your own investment mix (%)

Options 3 months 6 months 1 year 3 years (p.a.)
Cash 0.36 0.77 1.69 2.01
Conservative -0.12 0.86 3.49 4.05
Moderate 0.89 2.59 5.53 5.85
Growth 2.24 4.95 7.42 6.80
Australian Equities 4.47 9.54 11.03 6.59
International Equities    4.53 9.36 9.46 7.86
Global Property -2.34 -1.85 6.54 10.92
Global Fixed Interest -2.07 -1.49 4.08 4.97

 

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 December 31, 2016. PA = per annum. 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. Refer below footnotes for important information.)

Why did growth assets perform so well?

The most obvious reason shares and similar assets performed so well in the last three months of 2016 is primarily because of the victory of the Republican Party and election of US President Donald Trump, but also due to a solid lift in lead economic indicators and earnings momentum. The market presumes Trump policies of tax cuts and fiscal spending will stimulate growth in the US economy. As a result, sharemarkets ended the quarter strongly across most growth categories in the US.

The US central bank increased interest rates and the US economy grew 3.5 per cent year-on-year in the third quarter, a significant pick up from the soft first half of the year. A drop in unemployment rate further confirmed the continual strengthening of the US economy.

The Australian economy showed resilience, despite consumer and business confidence decreasing on the back of a slowdown in housing activity. Rising commodity prices helped to strengthen the terms of trade, with Australian shares particularly lifted by the resources sector.

In Europe, signs of slow economic recovery continued, while emerging economies didn’t fare so well, owing mainly to concern over US trade protectionism and foreign policies in the wake of the Trump victory and concerns that China’s currency may continue to weaken on strong Chinese capital outflows.

Super Insights

March  2017