A message from Steve Gamerov, Head of Diversified Portfolios

November 2022

 

It’s certainly been a year of ups and downs in investment markets. Continuing the widespread trend that began earlier this year – inflation, rising interest rates, and energy were once again the main challenges for the quarter ending 30 September 2022. These factors resulted in further falls across share and bond markets.

It is important to remember that our MySuper Growth Portfolio is well diversified and invests in a wide array of share markets but also invests in many other diversifying asset classes including unlisted infrastructure, real estate, cash, private equity, and alternative credit assets.

Investing in these diversifying asset classes, which tend to have different return patterns to shares, means that the returns for MySuper Growth Portfolio have been cushioned from the continuing volatility experienced in investment markets.

Over the 12 months to 30 September 2022, the global share, Australian share and Australian bond markets have fallen over 18%, 7% and 11%1 respectively. Over the same period, the MySuper Growth Portfolio returned -4.2% p.a.

Over longer time periods, MySuper Growth Portfolio continues to deliver positive performance despite the falls in share and bond markets throughout the year. Members in MySuper Growth Portfolio have received a return of 4.4% p.a. over 3 years, and 5.8% p.a. over the 5 years to 30 September 2022.2

Staying calm during market volatility

We understand that periods of prolonged market volatility, such as that experienced during 2022, can be unsettling. That’s why it’s important to remember that super is a long-term investment. For most of us, even for those in retirement, your super’s going to remain an investment for years into the future.

Jumping into and out of investments could jeopardise a long-term retirement savings plan, especially when it comes to your super. And by staying invested, you have the opportunity to participate in growth when markets recover.

For instance, if you are under 55 and had a balance of $100,000 invested in the MySuper Growth Portfolio five years ago, your balance would now be $132,698. Furthermore, this excludes any ongoing compulsory super contributions made during that time.3

MLC’s team of investment professionals actively manage our members’ portfolios. This means we take recent market movements as well as the outlook for market returns and risk into consideration when we adjust portfolios. This active investment approach is in our DNA at MLC and we have a long history of managing portfolios for our members using this approach.4

In today’s high inflation and volatile market environment, the MySuper Growth Portfolio continues to benefit from the strong cashflows, and inflation-protection associated with what we term ‘mid-risk’ assets, such as high-quality unlisted infrastructure, and real estate. Our private equity investments, or investments in companies not listed on share markets, as well as our alternative investments, also continue to be important parts of the MySuper Growth portfolio’s diversified asset mix.

Looking ahead

Share markets now reflect a much higher level of caution. Markets continue to be driven by macroeconomic forces – specifically inflation data and forecasts, as well as the path and pace of interest rates – and we expect volatility to continue in the near-term.

A high inflationary environment is one we were prepared for well in advance of the inflation shock of 2022 and we positioned our portfolios into assets that perform well in such environments. Commodities, high quality property and infrastructure assets as well as high quality credit assets have all been strong performers for our members during this period of rising inflation and interest rates.

Our investment team has a long history of steering our members’ portfolios through a range of challenging investment environments, including the 2008/09 Global Financial Crisis and the more recent COVID volatility of 2020. We believe we are well prepared to navigate the complex challenges posed by the markets today.

For our part, we believe that by sticking by time-tested investment principles, like diversification, we can steer portfolios through what lies ahead. Our portfolios’ ample liquidity also equips us to be able to participate in buying opportunities that may emerge.

1 Indices referenced: MSCI AC World Index (hedged), S&P/ASX 300 index (price), Australian bonds - Bloomberg AusBond Composite.

2 All returns are net of investment fees and tax considerations and do not include administration fees and costs. For details of relevant fees and costs, refer to the PDS.

3 This figure excludes any compulsory SG contributions made by an employer or any non-concessional contributions made from after tax-dollars contributed over that time. All returns are net of investment fees and tax considerations and do not include administration fees and costs. Past performance is not a reliable indicator future performance.

4 MLC MySuper Growth Portfolio option compared to the SuperRatings Fund Crediting Rate Survey – SR50 MySuper Index to 30 September 2022. The MySuper Growth Portfolio option outperformed the comparative industry median over 1, 3 and 5 years.