Colonial First State eyes private equity and infrastructure investments after members post 17pc returns in 2024

Colonial First State’s investment chief says the fund won’t invest in bitcoin, but will look for other opportunities after member returns jumped in 2024.

Colonial First State chief investment officer Jonathan Armitage.

Colonial First State has delivered upwards of 17 per cent in returns for some of its MySuper superannuation customers in the 2024 calendar year, beating its peer group average, as investments in global equities as well as robust performance from Australian shares paid off.

The high-risk strategies employed by aggressive growth funds came as the superannuation industry posted its best year since 2021.

The FirstChoice Employer Super balanced fund for members born after 1980 and until 2004 had the strongest returns of about 17.4 per cent, while those in the 2005-2009 bracket had the best at 17.6 per cent.

Those cohorts have above 90 per cent of funds invested in growth assets, compared to defensive sectors for retirement-aged members where the mix is 50-50.

The MySuper Lifestage 1965-69 cohort delivered a 13.8 per cent return, while the FirstChoice Employer Super growth fund (MySuper Lifestage 1975-79) posted a 16.6 per cent return.

Colonial First State chief investment officer Jonathan Armitage told The Australian it was the second year of double-digit returns for its members as it continued to benefit from strong gains in offshore and Australian equities.

“It was very clear that the returns for our funds were driven by equity exposures, not just in the US, but in other markets as well. But it was dominated by some of those tech companies and healthcare stocks too,” he said.

“Domestically we benefited from strong gains by the major banks and also from stocks such as Goodman Group.”

Analysis by SuperRatings shows the median balanced option returned 11.5 per cent for 2024, and most options delivered a return of more than 10 per cent, while the top providers achieved 12.5 per cent.

The past year was the strongest since the 13.4 per cent delivered in 2021 when equities rebounded from sluggish performance during the Covid-19 pandemic. The best return in the past 10 years is 14.7 per cent in 2019, while a 16.3 per cent bounce in 2013 is the best result this century.

Mr Armitage said Colonial First State had looked to diversify the future return sources for its members by looking into private credit, emerging markets and branching out its equity exposure. He added the fund had no plans to expand into bitcoin as other competitors such as AMP have done in the past year.

“We have no plans to add bitcoin into our investment mix. We think the technology that sits behind it is interesting, but crypto itself is difficult to point to any fundamentals that drive the price of it,” he said.

“We anticipate deploying more capital to areas like infrastructure and private equity. We do think that there are going to be some interesting opportunities that emerge over the next 12 to 24 months.”

CFS has $159bn in total funds under management and is 55 per cent owned by KKR and 45 per cent by Commonwealth Bank. The retirement provider said its annual fees were 15 per cent lower than the average MySuper fund.

Last week, AMP reported its MySuper members born in the 1980s and 1990s had returns of 15.2 per cent and 15.1 per cent respectively for the year.

Mr Armitage said, after two strong years of double digit returns, members should expect to see softer performances sooner than later with the average return over the past 25 years at about 7 per cent, according to superatings.com.

“The past two years have been unusually high returns and one way to think about that is that we’ve brought forward some future returns now and members should expect that returns will move back to those averages rather than remain where they are now,” he said.

“It won’t be a surprise over the next few years if you see returns normalise at longer-term levels.

Returns have been driven by a strong year for US equities, with the tech-heavy Nasdaq up 28 per cent for the year, the S&P 500 climbing 25 per cent and the Dow Jones Industrial Average adding 14 per cent.

The ASX 200 index closed off the 2024 calendar year with a 7.5 per cent gain, beating average annual gains of 3.8 per cent in the past decade and 5.6 per cent over the past 20 years.

Originally published as Colonial First State eyes private equity and infrastructure investments after members post 17pc returns in 2024