Investment option returns to 31 December 2013

  • All of VicSuper's investment options achieved positive returns for the December quarter and the 12-month period to 31 December 2013*. Options more heavily weighted to growth assets - Balanced, Growth, Equity Growth, Equity Growth Sustainability and Australian Shares – outperformed the options with less exposure to growth assets.
  • The Growth (MySuper) option benefited from the solid performance of equity markets, generating a 1-year return of 19% and 21% for accumulation and pension members respectively. Equity Growth was the best performing option for the quarter ending 31 December 2013.
  • Capital Secure and Capital Stable (the investment options more weighted to defensive assets) underperformed, reflecting weakness in Australian and international fixed interest markets.

* The Australian Shares option commenced in February 2013, therefore 12-month return figures are not available.

Table 1: VicSuper investment option returns

VicSuper FutureSaver

Accumulation (%)

VicSuper Pensions (%)

3-month FYTD 1-year 3-year 3-month FYTD 1-year 3-year
Cash 0.6% 1.2% 2.4% 3.4% 0.7% 1.4% 2.9% 4.0%
Capital Secure 1.8% 4.1% 7.0% 6.1% 2.1% 4.6% 7.7% 7.0%
Capital Stable 3.0% 6.7% 11.4% 7.5% 3.5% 7.5% 12.7% 8.7%
Balanced 4.3% 9.3% 15.7% 8.8% 4.8% 10.3% 17.4% 10.1%
Growth 5.3% 11.4% 19.2% 9.5% 5.9% 12.5% 21.3% 10.9%
Equity Growth 6.7% 14.5% 24.8% 10.9% 7.4% 15.9% 27.5% 12.4%
Equity Growth Sustainability 6.6% 14.3% 25.3% 10.9% 7.3% 15.4% 27.6% 12.3%
Australian Shares 3.1% 12.8% 0.0% 0.0% 3.2% 14.5% 0.0% 0.0%

Note: Past performance is not a reliable indicator of future performance. The 3-year return is annualised.

See the current Term Deposit rates.

Chart 1: VicSuper Investment Option Strategic Asset Allocation Chart 1: VicSuper Investment Option Strategic Asset Allocation

Note: The Cash and Term Deposit options are 100% invested in Cash while the Equity Growth, Equity Growth Sustainability and Australian Shares options are 100% invested in Equities.

Key themes underlying financial markets in 2014

The key themes for 2014 include:

  • Global growth will likely remain strong, led by the US, China and Japan.
  • Emerging markets are likely to recover in 2014, led by Latin America and Asia. However, countries with higher current account deficits (such as India and Indonesia) may continue to weigh on performance.
  • Australia should have reasonable GDP growth despite the slowdown in mining investment. However, GDP growth will likely remain below its long term average of 3.25%.
  • Bond yields will likely rise in 2014 (and thus weigh on the performance of fixed interest securities). As a result, the shift away from bonds into equities (focused on income) is likely to continue.

2013 Market summary

Chart 2: Major Equity Market Price Returns (to 31 December 2013) Chart 2: Major Equity Market Price Returns (to 31 December 2013)

Source: IRESS, VicSuper

  • In December, the Federal Open Market Committee (FOMC)* announced it will begin tapering its US $85 billion quantitative easing (ie bond-buying) program from January 2014 by US $10billion, signalling its confidence in the US economy. Importantly, it indicated it had no intention to lift interest rates before late 2015/early 2016.
  • This supported a strong finish to the year for equity markets in Australia and globally, with the exception of China (Shanghai), which ended the year 7% lower (dragged down by weakness in financials).
  • Despite an impressive performance, the Australian market underperformed the US (S&P500) and Japan (Nikkei) in 2013, with Japan’s performance driven by PM Shinzo Abe's aggressive economic stimulus, designed to pull the country out of its decade-long deflationary state.

* The FOMC is a committee within the Federal Reserve that oversees the Reserve’s buying and selling of US treasury securities.

Chart 3: Major Currency Returns (Index = 100 at November 2012) Chart 3: Major Currency Returns (Index = 100 at November 2012)

Source: IRESS, VicSuper

  • The AUD experienced its biggest yearly decline since 2008 (-14% in 2013) largely in response to speculation regarding the FOMC reducing its bond-buying program. In late December, the AUD/USD fell to a three year low of $0.88.
  • The Euro was the world’s best performing major currency in 2013, driven by the FOMC’s announcement and banks repatriating funds to increase their capital bases prior to an asset quality review by the European Central Bank.

2013 Asset class performance (to 31 December 2013)*

Chart 4: Major Index Returns (VicSuper’s Asset Class Benchmarks) Chart 4: Major Index Returns (VicSuper’s Asset Class Benchmarks)

Source: Bloomberg, IRESS, VicSuper

  • Australian Equities - the S&P/ASX 300 Accumulation Index gained 3% for the quarter and finished up 20% over the 12 months to 31 December 2013. The quarter's rise was not a steady climb, with the index losing 1.4% in November as investors took profits after the annual general meeting (AGM) season. The market dropped in mid- December as far as 6% from its November high when tapering was confirmed, before regaining most of those losses by the end of the year.
  • International Developed Market Equities - The MSCI World excluding Australian Equities Index (unhedged) gained 45% over the 12 months ending 31 December 2013 and 13% over the quarter. The performance was led largely by the US and Japan. Markets in the UK, Germany and France also helped drive the gains.
  • International Emerging Market Equities - The MSCI Emerging Markets Index gained 2% in the December quarter but fell 5% over the year. This was largely driven by the Chinese market, which ended the year lower as fears of a liquidity crunch (driven by structural reforms, including a more open banking system) weighed on stocks.
  • Australian and International Fixed Interest - Fixed income returns were relatively muted as reflected by the largely flat performance of the UBSA Composite Bond (benchmark for Australian Fixed Interest) and Barclays Global Aggregate (International Fixed Interest) indices. The US 10-year bond yield closed just below 3.0% at the end of December. This was almost a two-year high driven by a fall in prices as sentiment on the economic outlook turned more positive. Australia's long term rates followed a similar pattern.
  • Real assets - Real assets' includes property, infrastructure, timber (forestry plantations) and agricultural assets. The asset class returned 8% over the 12 months to 31 December 2013. Infrastructure, Property and Timber were all strong performers over the year.
  • Cash - The official Cash Rate in Australia finished at 2.50% at the end of December (down from 3% a year ago). Returns for the Cash Option reflect the Cash Rate.

* VicSuper measures investment performance against benchmark indices. A benchmark index is a collection of securities grouped together. An example is the S&P/ASX 300 Accumulation Index, which incorporates the top 300 companies by market capitalisation listed on the Australian Securities Exchange. The performance of the index provides a benchmark against which VicSuper can assess the performance of its fund managers.

Investment option returns to 31 December 2013

  • All of VicSuper's investment options achieved positive returns for the December quarter and the 12-month period to 31 December 2013*. Options more heavily weighted to growth assets - Balanced, Growth, Equity Growth, Equity Growth Sustainability and Australian Shares – outperformed the options with less exposure to growth assets.
  • The Growth (MySuper) option benefited from the solid performance of equity markets, generating a 1-year return of 19% and 21% for accumulation and pension members respectively. Equity Growth was the best performing option for the quarter ending 31 December 2013.
  • Capital Secure and Capital Stable (the investment options more weighted to defensive assets) underperformed, reflecting weakness in Australian and international fixed interest markets.

* The Australian Shares option commenced in February 2013, therefore 12-month return figures are not available.

Table 1: VicSuper investment option returns

VicSuper FutureSaver

Accumulation (%)

VicSuper Pensions (%)

3-month FYTD 1-year 3-year 3-month FYTD 1-year 3-year
Cash 0.6% 1.2% 2.4% 3.4% 0.7% 1.4% 2.9% 4.0%
Capital Secure 1.8% 4.1% 7.0% 6.1% 2.1% 4.6% 7.7% 7.0%
Capital Stable 3.0% 6.7% 11.4% 7.5% 3.5% 7.5% 12.7% 8.7%
Balanced 4.3% 9.3% 15.7% 8.8% 4.8% 10.3% 17.4% 10.1%
Growth 5.3% 11.4% 19.2% 9.5% 5.9% 12.5% 21.3% 10.9%
Equity Growth 6.7% 14.5% 24.8% 10.9% 7.4% 15.9% 27.5% 12.4%
Equity Growth Sustainability 6.6% 14.3% 25.3% 10.9% 7.3% 15.4% 27.6% 12.3%
Australian Shares 3.1% 12.8% 0.0% 0.0% 3.2% 14.5% 0.0% 0.0%

Note: Past performance is not a reliable indicator of future performance. The 3-year return is annualised.

See the current Term Deposit rates.

Chart 1: VicSuper Investment Option Strategic Asset Allocation Chart 1: VicSuper Investment Option Strategic Asset Allocation

Note: The Cash and Term Deposit options are 100% invested in Cash while the Equity Growth, Equity Growth Sustainability and Australian Shares options are 100% invested in Equities.

Key themes underlying financial markets in 2014

The key themes for 2014 include:

  • Global growth will likely remain strong, led by the US, China and Japan.
  • Emerging markets are likely to recover in 2014, led by Latin America and Asia. However, countries with higher current account deficits (such as India and Indonesia) may continue to weigh on performance.
  • Australia should have reasonable GDP growth despite the slowdown in mining investment. However, GDP growth will likely remain below its long term average of 3.25%.
  • Bond yields will likely rise in 2014 (and thus weigh on the performance of fixed interest securities). As a result, the shift away from bonds into equities (focused on income) is likely to continue.

2013 Market summary

Chart 2: Major Equity Market Price Returns (to 31 December 2013) Chart 2: Major Equity Market Price Returns (to 31 December 2013)

Source: IRESS, VicSuper

  • In December, the Federal Open Market Committee (FOMC)* announced it will begin tapering its US $85 billion quantitative easing (ie bond-buying) program from January 2014 by US $10billion, signalling its confidence in the US economy. Importantly, it indicated it had no intention to lift interest rates before late 2015/early 2016.
  • This supported a strong finish to the year for equity markets in Australia and globally, with the exception of China (Shanghai), which ended the year 7% lower (dragged down by weakness in financials).
  • Despite an impressive performance, the Australian market underperformed the US (S&P500) and Japan (Nikkei) in 2013, with Japan’s performance driven by PM Shinzo Abe's aggressive economic stimulus, designed to pull the country out of its decade-long deflationary state.

* The FOMC is a committee within the Federal Reserve that oversees the Reserve’s buying and selling of US treasury securities.

Chart 3: Major Currency Returns (Index = 100 at November 2012) Chart 3: Major Currency Returns (Index = 100 at November 2012)

Source: IRESS, VicSuper

  • The AUD experienced its biggest yearly decline since 2008 (-14% in 2013) largely in response to speculation regarding the FOMC reducing its bond-buying program. In late December, the AUD/USD fell to a three year low of $0.88.
  • The Euro was the world’s best performing major currency in 2013, driven by the FOMC’s announcement and banks repatriating funds to increase their capital bases prior to an asset quality review by the European Central Bank.

2013 Asset class performance (to 31 December 2013)*

Chart 4: Major Index Returns (VicSuper’s Asset Class Benchmarks) Chart 4: Major Index Returns (VicSuper’s Asset Class Benchmarks)

Source: Bloomberg, IRESS, VicSuper

  • Australian Equities - the S&P/ASX 300 Accumulation Index gained 3% for the quarter and finished up 20% over the 12 months to 31 December 2013. The quarter's rise was not a steady climb, with the index losing 1.4% in November as investors took profits after the annual general meeting (AGM) season. The market dropped in mid- December as far as 6% from its November high when tapering was confirmed, before regaining most of those losses by the end of the year.
  • International Developed Market Equities - The MSCI World excluding Australian Equities Index (unhedged) gained 45% over the 12 months ending 31 December 2013 and 13% over the quarter. The performance was led largely by the US and Japan. Markets in the UK, Germany and France also helped drive the gains.
  • International Emerging Market Equities - The MSCI Emerging Markets Index gained 2% in the December quarter but fell 5% over the year. This was largely driven by the Chinese market, which ended the year lower as fears of a liquidity crunch (driven by structural reforms, including a more open banking system) weighed on stocks.
  • Australian and International Fixed Interest - Fixed income returns were relatively muted as reflected by the largely flat performance of the UBSA Composite Bond (benchmark for Australian Fixed Interest) and Barclays Global Aggregate (International Fixed Interest) indices. The US 10-year bond yield closed just below 3.0% at the end of December. This was almost a two-year high driven by a fall in prices as sentiment on the economic outlook turned more positive. Australia's long term rates followed a similar pattern.
  • Real assets - Real assets' includes property, infrastructure, timber (forestry plantations) and agricultural assets. The asset class returned 8% over the 12 months to 31 December 2013. Infrastructure, Property and Timber were all strong performers over the year.
  • Cash - The official Cash Rate in Australia finished at 2.50% at the end of December (down from 3% a year ago). Returns for the Cash Option reflect the Cash Rate.

* VicSuper measures investment performance against benchmark indices. A benchmark index is a collection of securities grouped together. An example is the S&P/ASX 300 Accumulation Index, which incorporates the top 300 companies by market capitalisation listed on the Australian Securities Exchange. The performance of the index provides a benchmark against which VicSuper can assess the performance of its fund managers.