AustralianSuper defies downturn with 0.52pc gain for balanced option, bullish about future

AustralianSuper optimistic about super returns over the next 18 months, after defying COVID-19 to post a 0.52pc gain for 2020.

Super savers have been bracing for a hit from the coronavirus pandemic.

AustralianSuper is bullish about superannuation returns over the next 18 months on the back of big government incentives to boost the post-COVID-19 economy.

It comes after Australia’s biggest super fund announced a 0.52 per cent gain for its balanced option in the 2020 financial year after a big rebound in the final quarter.

The surprise positive result follows the hammering Australian markets and the global economy suffered at the “extraordinary” coronavirus crisis unfolded.

“To arrive at the end of the financial year with a positive result given the turmoil we have seen is a very good outcome for members,” said AustralianSuper investment chief Mark Delaney.

He said returns had been strong in the first half of the year, and financial markets had been buoyed by monetary and fiscal stimulus in the past three months.

Mr Delaney told The Australian “the economy has grown faster than people had expected over the last few months.”

“Governments are spending big, interest rates are low and the financial markets are coming in behind them.

“Financial markets are now more confident that outbreaks can be managed.”

AustralianSuper has $185 billion under management with 55 per cent of its money invested in equities and 33 per cent in international equities.

“The Australian market is too concentrated to buy sectors so you have to pick individual stocks within sectors,” Mr Delaney said.

The fund is overweight US growth stocks, particularly the big tech names like Amazon, Google and Apple.

Fixed interest share of the portfolio has fallen from 13 per cent at the end of June to around 8.4 per cent with, cash up from 7.5 per cent to 8.7 per cent.

Mr Delaney said market moves over the last 12 months highlighted the danger of trying to over-finesse superannuation investments.

The year started on a high with trade talks before COVID-19 hit and the market plummeted, but in the last quarter it had recovered.

In the end “I said thank goodness its over”, said Mr Delaney.

AustralianSuper kept its asset allocation fairly stable throughout the year, except with more going into cash and less from fixed income.

Before this year’s small return, AustralianSuper’s balanced option has returned 7.35 per cent a year over five years, 8.77 per cent a year over 10 years, and 7.31 per cent a year over 15 years.

Mr Delany said it was the eleventh consecutive financial year of positive returns for AustralianSuper members.

He said $50,000 invested with the balanced option from July 2010 would now be worth $115,921, while the same amount invested from July 2000 would now be worth $202,608.

Last week, Chant West predicted an average return of -1.3 per cent for the median growth fund for the 2020 financial year.

The predicted negative result would be the first negative result since the global financial crisis, Chant West said, but was better than expected.

AustraliaSuper chief investment officer Mark Delaney. Picture: Eugene Hyland

Asked about the dangers facing financial markets, Mr Delaney said there were worries that if the Democrats swept the US election that that would be bad for markets.

“There is no concern with Biden winning the Presidency, just if the Democrats also sweep congress,” Mr Delaney said.

Other dangers include COVID-19, if it proves harder to get rid of and if economic stimulus is withdrawn too quickly.

“In September if the economy has not improved then we need to maintain at least some form of incentives,” Mr Delaney said.

“Some sectors are obviously worse off like tourism, education and entertainment so maybe targeted payments or reduced payments,” he added.

Mr Delaney rejected the push to stall planned increases in the superannuation guarantee, saying:” There is a danger in trying to manage short term economic policy with long term investments.”

“Adjusting the portfolio based on panicked headlines is the wrong way to go,” he said.

Mr Delaney also expressed concern about the government‘s early release scheme to allow people to withdraw up to $10,000 from their superannuation, which he said was dominated by 30-year-olds.

The danger was that $50,000 invested 20 years ago would be worth $200,000 today and it would double in another 20 years.

Figures released on Monday showed more than $18bn had now been withdrawn from the super sector, with a second wave of applications expected after the second round opened on 1 July.

AustralianSuper has been the hardest hit by the scheme, with 346,267 members withdrawing more than $2.4bn to June 28.

Mr Delaney said “digitisation of services is the key technology development of the virus.”

“Most of my investment staff are happy to work from home because there are fewer disruptions,” he said.

Mr Delaney said going forward most people would only work two to three days a week in the office, and he had enjoyed working from home.

AustralianSuper is pushing ahead with plans to open a New York office of around 20 people focusing on private equity, infrastructure and credit, although COVID-19 had delayed the rollout.