Hi I’m Brian Parker, Sunsuper’s Chief Economist.
How has Sunsuper performed over the past quarter?
Sunsuper’s Balanced option for Super-savings accounts returned 4.2 per cent for the June quarter, and 8.6 per cent for the financial year ended June 2019.
And longer-term returns have been strong, with the Balanced option posting returns of 8.9 per cent p.a. over the last five years and 9.1 per cent p.a. over the ten years to the end of June.
How have share markets performed?
World share markets enjoyed another strong quarter, more than recouping their losses from the final quarter of 2018.
Over the June quarter, the Australian share market was one of the world’s best performing, benefitting from rising iron ore prices and the Reserve Bank’s moves to ease monetary policy.
In fixed income markets, returns have been very solid. Bond yields have fallen sharply, producing significant capital gains for bond investors in 2019.
What about the global economic developments?
These very strong share market gains have occurred despite signs of a weaker world economy, and partly reflect an easing in trade tensions between the US and China. But signals and actions from central banks in the US, Europe and here in Australia have been much more important.
The US Federal Reserve has signalled that they’re likely to lower interest rates over the coming months.
The European Central Bank has also signalled a willingness to ease policy further in response to weaker than expected economic growth and very low inflation.
And our own Reserve Bank moved to cut official interest rates in June and again in July. Even though the Australian economy continues to generate reasonable jobs growth, some of the leading indicators of employment have weakened, and wage and price inflation remain very subdued.
What is Sunsuper doing?
We have no way of knowing with any certainty how the economy and financial markets will evolve over the course of this year.
We carefully construct portfolios with a view to meeting their medium to long-term investment objectives.
And over the medium to longer term, we expect share markets to continue outperforming cash and fixed income investments, particularly given that market interest rates have fallen to extremely low levels.
And we view the diversification benefits provided by alternative assets, especially our unlisted assets – property, infrastructure and private equity assets – as very attractive.
They allow us to build portfolios for members that tend to exhibit smaller variations in returns over the short term, without compromising long-term expected returns.
Sunsuper has 20 investment options that are designed to meet the needs of a wide range of members. And remember, if you’re invested in Sunsuper’s default option, the Lifecycle Strategy, as you approach and then enter retirement, we automatically and gradually reduce your exposure to growth assets such as shares. We do that to reduce the impact of market downturns on your retirement.
As always, I’d encourage any of our members, especially if you’re approaching or in retirement, or if domestic and global uncertainties cause you any continuing concern, to speak to one of our financial advisers to find out if the Sunsuper investment option you have is the right one for you. So please give Sunsuper a call on 13 11 84.