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Investment markets have taken a hit in recent months. Find out why and what it means for your super.

Investment markets have been challenging for the past 6 months. Economies around the world are facing a perfect storm of rising inflation, higher interest rates and ongoing concerns about economic growth. It’s all resulted in volatile markets and lower returns from your super investments than we have seen in recent years, especially compared with the extraordinary returns we saw last financial year.

Thankfully, it’s the long-term returns that matter most when it comes to your super balance at retirement, and we continue to deliver strong long-term returns1.

Our Growth (MySuper) option, where most of our members are invested, delivered 6.5%p.a. and 8.7% p.a. over 5 and 10 years respectively to 30 June 2022.

Your returns have been resilient despite market falls

Share markets around the world have fallen over the past 6 months. This means that investment portfolios which include shares, including super funds, have been affected. The good news is that when your super is invested in different assets, your losses won’t be as big as overall market drops.

The Australian share market, represented by the ASX 200, dropped around 7% for the year to 30 June 2022, and the global share market, represented by the S&P 500, was down 12%. To put these falls into perspective, the S&P 500 posted its worst first half performance (1 January to 30 June 2022) in 50 years.

Technology companies have been some of the hardest hit. The Nasdaq Index, which has a high concentration of technology companies, has been hit especially hard in the 6 months to 30 June 2022. It is now more than 30% below its all-time high in November 2021. Some of the largest technology companies have also experienced sizeable falls in value. Netflix is down 70%, and Apple and Alphabet have fallen by roughly 23% and 24% respectively.

Falls in share markets have had the greatest impact on our higher growth investment options, because these options have a larger allocation to shares. Our Equity Growth and Growth (MySuper) options returned -3.2% and -3.3% respectively for the 12 months to 30 June 2022.

On the other hand, our unlisted investments helped keep your returns resilient. Property, infrastructure and private equity performed well for the year, helping stabilise returns from our diversified investment options.

The chart below shows how your super returns fell less than the market.

VicSuper diversified options graph 2022



The beauty of not putting your eggs in one basket

Most of our investment options, and members, are not invested in shares alone. They are invested in a mix of different types of investments – combined to create a diversified investment portfolio.

Put simply, diversification means not putting all your eggs in one basket, but rather combining different investments which typically don’t all go up, or down, at the same time. Investing in a diversified option reduces the risk that any one type of investment doesn’t perform as expected. It also helps smooth out returns, making them more resilient and improving overall returns over the long term.

This year has been a good lesson in the benefits of diversification. Some investments, including shares, went down. But next year these very same investments could have higher returns than others. No one has a crystal ball in investing. Markets and investments will always move up and down over time, and it’s not always possible to predict when that will happen. It’s a normal part of investing and for super it’s the long term returns that matter most.

Looking forward, we’re confident our diversified options will continue to deliver strong long-term returns.

Stay invested, it’s long-term returns that matters most

Super is a long-term investment, but along the way there will be some short-term periods of volatility. This is a fact of life in investing, and often doing nothing, staying the course, and staying invested can give the best outcome.

The chart below shows the benefits of staying invested even as markets move up and down. You can see that staying invested rather than switching to cash when markets fell at the beginning of the Covid-19 pandemic meant your super grew more.

 

We invest your super with a long-term mindset because our aim is to deliver strong long-term returns. Our investment approach is focused on identifying the sectors, assets and mix of investments which we believe will perform strongly over the long term, while at the same maintaining the flexibility to make short-term adjustments and respond to short-term market challenges.

Past performance is not an indicator of future performance.

1 Source: SuperRatings Fund Crediting Rate Survey 31 May 2022 (SR50 Balanced [60-76] Index – approximately 48 options). VicSuper Future Saver Growth option delivered an annualized return over 10 years of 9.2% p.a. compared to the index median of 8.4% p.a. for the same period. Returns are net of investment fees, tax and implicit asset-based administration fees. Investment returns are not guaranteed. Past performance is not a reliable indicator of future performance.
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