Investment Peformance Update

A game of two halves – Energy Super’s 2018–19 investment performance update

How investment markets performed in 2018–19

The 2018–2019 financial year investment market performance was a ‘game of two halves’. There were some significant bouts of volatility and at ‘half time’ share markets weren’t looking so good. You can see this clearly in the orange bars in the table below.

Investment markets, in particular during December 2018, were concerned about the impacts of a global economic slowdown, ongoing inflation fears (or a lack of), trade tensions between China and the US, and the potential for US interest rate increases by the US Federal Reserve.

Source: Bloomberg, Energy Super.
NOTE: The returns for Australian Shares and International Shares for the period from 30 June 2018 to 31 December 2018 were -6.8% and -9.8% respectively.

Fast forward to the end of June 2019. By this time, most investment markets – shares, bonds, credit, real estate, private markets – finished strongly as concerns about trade wars and increasing interest rates eased. As a result, most major asset classes were able to produce reasonable gains over the period, especially compared to where they began at the start of 2019.

The table below highlights the returns from key investment markets over longer periods:

Source: Bloomberg, Energy Super.

What’s interesting to note from the market movements in 2019, is that both shares and bond markets performed well. Typically, when shares are doing well bonds produce more moderate returns, and vice versa.

In August 2019, even with the recent market volatility, the Australian share market has hit new record highs. Australian Government Bonds have also rallied to record levels. This is likely to be more of a reflection of the current market and economic cycle as Central Bank policy continues to influence investment market conditions.

How Energy Super’s investment options have performed over the last 12 months

Thanks to the good returns from investment markets over the last 12 months, all of Energy Super’s diversified investment options have exceeded their inflation (All Groups Consumer Price Index – CPI) related investment return objectives as you can see in the tables below.

The same is also true of the Fund’s performance over the medium (3–5 years) and long term (10 years).

The performance of all our Accumulation investment options to 30 June 2019 are listed below:

Investment option 1 yr return (%) 3 yr return (% p.a.) 5yr return (% p.a.) 10yr  return (% p.a.)
MySuper 5.4% 8.6% 8.0% N/A
Stable 3.8% 5.3% 5.3% 6.5%
Capital Managed 4.3% 6.8% 6.4% 7.7%
Balanced 5.4% 8.6% 8.0% 8.7%
Indexed Balanced N/A N/A N/A N/A
SRI Balanced 6.9% 8.0% 6.5% 7.6%
Growth 5.7% 10.0% 9.0% 9.9%
Cash Enhanced 1.9% 1.9% 2.0% 3.1%
Fixed Interest 5.4% 3.1% N/A N/A
International Shares 7.5% 12.8% 11.0% 11.4%
Australian Shares 5.9% 11.4% 8.6% 10.3%

Source: Energy Super. Returns are for the respective period to 30 June 2019.

And similarly our Income Stream investment options:

Investment option 1 yr return (%) 3 yr return (% p.a.) 5yr return (% p.a.) 10yr  return (% p.a.)
Stable 4.6% 6.1% 6.0% 7.6%
Capital Managed 5.5% 7.8% 7.2% 8.9%
Balanced 6.4% 9.7% 8.8% 9.7%
Indexed Balanced N/A N/A N/A N/A
SRI Balanced 7.5% 9.0% 7.1% 8.4%
Growth 6.6% 11.2% 10.0% 11.1%
Cash Enhanced 2.2% 2.2% 2.4% 3.6%
Fixed Interest 6.6% 3.8% N/A N/A
International Shares 8.1% 14.0% 11.8% 12.3%
Australian Shares 7.7% 13.0% 9.8% 11.4%

Source: Energy Super. Returns are for the respective period to 30 June 2019.

Returns compared against objectives

The Energy Super Trustee sets objectives for each investment option and these are outlined in the Investment Guide and Income Stream Product Disclosure Statement. Where the objective of an investment option is to exceed inflation or a performance benchmark by a certain level (as measured by the CPI) or a performance benchmark (such as the Bloomberg AusBond Bank Bill), it’s anticipated that the return objective should be achieved over the long term.

The table below compares the investment returns for the Accumulation investment options against their respective return objectives for the last 12 months and the last 10 years:

Investment option CPI-related investment return objective One year option return CPI+ return Investment return objective met? 10 year option return CPI+ return Investment return objective met?
MySuper 3% above CPI 5.4% 4.6% Yes N/A N/A N/A
Stable 1.5% above CPI 3.8% 3.1% Yes 6.5% 3.7% Yes
Capital Managed 2% above CPI 4.3% 3.6% Yes 7.7% 4.2% Yes
Balanced 3% above CPI 5.4% 4.6% Yes 8.7% 5.2% Yes
Indexed Balanced 3% above CPI N/A 4.6% N/A N/A N/A N/A
SRI Balanced 3% above CPI 6.9% 4.6% Yes 7.6% 5.2% Yes
Growth 3.5% above CPI 5.7% 5.1% Yes 9.9% 5.7% Yes

Source: Energy Super. Note the MySuper and Indexed Balanced investment options do not have all of the data available for the respective time periods as these options were first offered to members on 1 September 2013 and 6 April 2019.

The table below presents the equivalent data for the Income Stream investment options:

Investment option CPI-related investment return objective One year option return CPI+ return Investment return objective met? 10 year option return CPI+ return Investment return objective met?
Stable 1.5% above CPI 4.6% 3.1% Yes 7.6% 3.7% Yes
Capital Managed 2% above CPI 5.5% 3.6% Yes 8.9% 4.2% Yes
Balanced 3% above CPI 6.4% 4.6% Yes 9.7% 5.2% Yes
Indexed Balanced 3% above CPI N/A N/A N/A N/A N/A N/A
SRI Balanced 3% above CPI 7.5% 4.6% Yes 8.4% 5.2% Yes
Growth 3.5% above CPI 6.6% 5.1% Yes 11.1% 5.7% Yes

Source: Energy Super. Note that Indexed Balanced investment option does not have all of the data available for the respective time periods as this option was first offered to members from 6 April 2019.

How Energy Super has performed compared to other super funds

Comparisons with other super funds are always difficult, as every super fund will set their investment strategy to suit the needs of their members. This means that what strategy works for one fund, may not suit the needs of members of other funds, particularly when factors such as insurance, fees, financial advice, and member services are factored in.

Over the past 12 months

The returns for our diversified investment options that contain growth assets such as shares (for example, Balanced, MySuper, Growth) were all positive over the period. While they met or exceeded their investment return objectives during this time, 1-year performance has been impacted by certain asset classes, including:

  • Australian Shares – active managers in this asset class struggled to outperform the ASX200. Companies such as Lend Lease, James Hardie and Clydesdale Bank were the main contributors to underperformance.
  • Property – Energy Super’s bias towards Australian retail (shopping centre) assets, which historically have been very strong performers for the Fund, led to lower 1 year performance as the office market in Australia delivered strong returns in comparison to retail assets in this timeframe.

Over the long term

Over the long term we remain pleased with our performance. During this time, our investment options have produced returns that have both exceeded the respective investment return objectives as well as rated highly when compared to peers (sourced from the relevant SuperRatings SR50 Fund Crediting Rate surveys) as you can see in the graph below.

It highlights the average investment returns over the last 10 years for investment options that are part of the SuperRatings SR50 Fund Crediting Rate surveys.  The vast majority of our equivalent investment options sit towards the top of these tables for Accumulation:

Source: SuperRatings Fund Crediting Rate Survey – June 2019, Energy Super. Note that certain investment options (MySuper and Indexed Balanced) have not been in existence for 10 years and so there is no comparison data available at this time.

Investment option Energy Super 10yr  return (% p.a.) Median Fund 10yr return (% p.a.) 10 yr Performance ranking No of participating funds
Stable 6.5% 6.1%                     11                     44
Capital Managed 7.7% 7.2%                       4                     21
Balanced 8.7% 8.6%                     19                     45
Growth 9.9% 9.3%                       7                     43
Cash Enhanced 3.1% 2.6%                       2                     46
International Shares 11.4% 10.7%                     10                     44
Australian Shares 10.3% 9.6%                       8                     44

Source: SuperRatings Fund Accumulation Crediting Rate Survey – June 2019, Energy Super.

And for Income Stream:

Investment option Energy Super 10yr return (% p.a.) Median Fund 10 yr return (% p.a.) 10 yr Performance ranking No of participating funds
Stable 7.6% 6.9%                       7                     39
Capital Managed 8.9% 8.4%                       4                     21
Balanced 9.7% 9.6%                     17                     39
Growth 11.1% 10.4%                       5                     35
Cash Enhanced 3.6% 3.2%                       4                     41
International Shares 12.3% 11.8%                     16                     39
Australian Shares 11.4% 10.7%                     10                     41

Source: SuperRatings Fund Pension Crediting Rate Survey – June 2019, Energy Super.

A final word

Our Board and Investment Committee regularly reviews the performance of the Fund. It receives advice from both its investment consultant, external investment managers and internal investment team, and makes adjustments to assets the Fund is invested in and investment manager selections where required.

The Board and Committee operate under strong governance principles that are based on expected long and shorter term risk and returns. Its aim is to get the most from your investment over the long term, and it’s this long-term focus that provides the discipline for investing during volatile times like we’re experiencing now.

If you’re not comfortable with your level of risk or you’re close to retirement, it might be a good idea to speak with one of our financial advisers.* They can speak to you about the appropriateness of your investment strategy and how to get the most from your super investment before you retire.

To talk to a financial adviser about your Energy Super investment strategy or about our retirement options, contact us.

* Energy Super’s advice is provided by ESI Financial Services Pty Ltd (ABN 93 101 428 782) (AFSL 224952), a wholly owned entity of Energy Super. The financial advice you receive is provided under the Australian Financial Services Licence held by ESI Financial Services Pty Ltd and therefore is not the responsibility of Energy Super.

The past performance information provided in this article is for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. The latest investment performance information can be obtained from www.energysuper.com.au

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