AustralianSuper has reported a “solid” return of 8.46 per cent from its balanced option for the financial year 2024, bolstered by strong performances from share markets.
More than 90 per cent of its members are invested in this option.
Meanwhile, its retirement option, Choice Income, saw an annual return of 9.25 per cent in the balanced option.
Mark Delaney, AustralianSuper chief investment officer, said it was a “pleasing” result all round for the fund, particularly as the fund was more defensively positioned up until December 2023.
“The portfolio was more defensively positioned but this was adjusted in the second half in the year,” he told InvestorDaily.
“We had a higher weight to fixed interest and lower weight to listed equities but we have since moved to increase holdings in equities.”
In particular, Delaney attributed the fund's strong performance to international and Australian share markets, highlighting the significant impact of this year's tech rally.
“Equities have done well due to strong earnings growth from technology companies in the US and strong consumer spending in Australia and overseas, which helped to drive up company earnings,” he said.
The executive noted easing inflation levels were another contributing factor “that boosted investor confidence, which in turn, lifted markets to higher levels”.
Looking at the performance of other asset classes, Delaney observed “more modest returns” from infrastructure, credit, fixed interest, and cash, although these still played an important role in supporting long-term returns.
While above its goal of achieving CPI plus 4 per cent over the long term, AustralianSuper’s return falls behind a number of its peers that announced results this week, such as HESTA’s 9.1 per cent for its MySuper Balanced Growth default option and Australian Retirement Trust’s 9.9 per cent for its balanced option.
It also lags SuperRatings’ expected median balanced option, with the research house forecasting this to stand at 8.8 per cent in the year to June 2024.
For Delaney, the year ahead "is not an environment to be concerned about." He noted that economies are "rebalancing and growing around trend," and interest rates appear to be "coming off."
He told InvestorDaily that the most important cyclical issue going forward is how closely inflation slows to the target level, allowing central banks to ease policy.
“This issue is key because high rates are restraining growth is almost every country, even the US,” he said.
“It is the expectation of lower rates and an extended business cycle expansion, well into 2025, that has been supporting share markets this year.”
More broadly, the investment executive noted various structural trends related to artificial intelligence (AI) that appear promising.
He also highlighted the energy transition, which could be disruptive in the interim, but will be “an overall positive eventually”.
