SuperRatings estimated on Wednesday that the median balanced super fund would return 8.8 per cent for the financial year, up from 8.5 per cent last year. The S&P/ASX 200 returned 7.8 per cent and the S&P 500 returned 22.7 per cent in the same period.
“Global equities were a key driver [of our returns]. We’ve been overweight [as] we took the view mid to late last year that the economic conditions, particularly in the US, didn’t look as weak or as vulnerable as many people in the market were anticipating,” Ms Shelley said.
“It wasn’t necessarily a bet on AI or those tech stocks per se, but it was more that those underlying economic conditions looked supportive.
“That panned out … a lot of that earlier pessimism about economic conditions in the US and Europe has been a surprise to the upside.”
Shares trump unlisted assets
While unlisted assets still stymied AMP’s overall returns, Ms Shelley said its low exposure to property helped cushion the blow.
This bias towards unlisted assets has helped industry funds historically outperform retail funds over the long-term and cushioned customers’ retirement savings from sharemarket volatility in bad years for equities.
Jonathan Armitage reckons commercial real estate prices will keep falling. Dominic Lorrimer
But shifts to online shopping and the pandemic move to flexible work means many are now heavily invested in plummeting assets. The regulator is also pressuring funds to improve their unlisted asset valuation practices over concerns about their accuracy and management of diversification and liquidity risks.
“Office property was a key weakness [last year], and we did see some valuations broadly in line with [the market]. But we have a lower weighting comparative to industry super funds – it’s less than 1 per cent of funds under management,” Ms Shelley said.
AMP had also been on a three-year mission to be “ruthless with assets where returns have been lagging”, she added, leading it to completely exit some assets such as hedge funds.
Mr Armitage pointed to technology stocks as a key force behind CFS’s strong returns.
“But it’s not just been tech – the contribution from a much wider range of stocks also became more important in the past four to five months,” he said.
“If we think about some of those strong returns we’ve seen across Europe, companies like Ferrari have continued to see very strong returns as they play into this dynamic of luxury goods … and healthcare continues to benefit from ageing populations.”
He also said commercial real estate suffered some “pretty significant declines” last financial year, but that CFS’ unlisted property exposure was largely in logistics.
“That’s obviously helped returns to members in terms of having a very low exposure.”
Further falls to come
Mr Armitage hoped 12 months ago that CFS could pick up some bargains in commercial real estate as valuations plummeted, but said it had not made any material moves yet as prices were not yet bottoming out.
He predicted the decline would continue for the rest of the year too, though possibly at a slower rate than in the past six months.
Ms Shelley similarly said AMP’s portfolio was liquid enough to jump on any cheap opportunities, but she “hadn’t seen anything in the property space to date”.
Mark Delaney says he was too defensive last year. Elke Meitzel
Chant West expects the value of most super funds’ unlisted property portfolios would fall “in the high single digits” this financial year, despite them already slashing property values by as much as 15 per cent across the board last year.
Mr Delaney said AustralianSuper’s property exposure was also “very low” compared to most super funds, but still struggled across “all segments … and in all markets” in 2023-24.
But his fund failed to benefit as much from soaring global equities as rivals after it turned too defensive over Christmas, cutting back its listed market exposure in favour of cash and fixed income in the face of a concerning economic outlook.
Mr Delaney said he repositioned towards equities when that outlook did not eventuate, but that technology stocks had already made significant gains by that point.
Rest Super’s default MySuper option delivered similar returns to AustralianSuper for the financial year with 8.67 per cent, while HESTA handed customers 9.1 per cent and the Australian Retirement Trust outperformed with 11.3 per cent.
Most of the superannuation sector’s $3.6 trillion in funds under management is in default MySuper options as customers who are still working are put into these strategies unless they actively opt into others.