Déjà vu FY17-18 Investments update How we fared in FY18 and why we think it will be different in FY19 Webinar for accredited financial advisers Date: 24 July 2018 Presenter: Stephen Fallet, Manager, Investment Communications
This is general information only This information has been prepared for professional financial advisers only and is not suitable for retail clients. It is of a general nature and does not take into account any persons personal objectives, situation or needs. Before making a decision about AustralianSuper, you should consider their financial requirements and read our Product Disclosure Statement, available at australiansuper.com/adviserresources or by calling Adviser Services 1300 362 453. There are references to performance in this presentation. It is important to note that investment returns are not guaranteed and that past performance is not a reliable indicator of future returns. AustralianSuper Pty Ltd ABN 94 006 457 987 AFSL 233788 Trustee of AustralianSuper ABN 65 714 394 898 2
Presenter Stephen Fallet As Manager, Investment Communications, Stephen is responsible for monitoring and communicating the strategy and performance of AustralianSuper s PreMixed and DIY single asset class investment options. Stephen joined AustralianSuper in August 2014, bringing with him over 25 years experience in the investment management industry. With a background in economics, Stephen is a Fellow of Finsia (FFIN) and a Certified Investment Management Analyst (CIMA). 3
What are we covering Déjà vu? FY18 was different to FY17, but not if you were looking at asset market returns How did AustralianSuper s investment options perform in world of stronger growth and low interest rates? What s in store for FY19 and how are the Investment Options positioned? When is the time to de-risk? 4
2018 Asset class returns Asset class returns Emerging Mkt Equities Developed Mkt Equities Australian Equity Property Infrastructure Private Equity Australian Cash Global Bonds Australian Bonds Australian dollar -6% -3% 0% 3% 6% 9% 12% 15% 18% 5 yrs annualised ending June 2018 1 year June 2018 Source: AustralianSuper. 5
Balanced option performance Returns to 30 June 2018 Balanced option Median * Relative (bps) Ranking Year % 11.08 9.22 +186 3 / 49 3 years % pa 9.30 7.29 +201 3 / 49 5 years % pa 10.51 8.91 +160 2 / 49 7 years % pa 9.81 8.48 +133 3 / 49 10 years % pa 7.31 6.37 +94 6 / 45 15 years % pa 8.59 7.74 +85 2 / 38 20 years % pa 7.95 7.23 +72 3 / 20 *Source: SuperRatings SR50 Balanced Fund Survey June 2018. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
PreMixed options performance Rankings to 30 June 2018 1 year 3 years p.a. 5 years p.a. 10 years p.a. High Growth 4 / 48 2 / 48 2 / 48 12 / 43 Balanced 3 / 49 3 / 49 2 / 49 6 / 45 Socially Aware = 21 / 49 = 11 / 49 = 5 / 49 = 1 / 45 Indexed Diversified n/a n/a n/a n/a Conservative Balanced 6 / 24 2 / 24 2 / 24 2 / 24 Stable 10 / 49 1 / 49 2 / 49 1 / 43 Source: SuperRatings Fund Crediting Survey June 2018. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
What does this mean for our average member? Source: AustralianSuper. Historical returns of the balance option, assumes SG contributions of 9.5% of the average member for that age. The case study is provided for illustration purposes only and is not a representation of the actual benefits that may be received or fees and costs that may be incurred. 8
FY18 What we got right All three active management levers contributed to performance in the PreMixed options portfolio mix the most significant contributor. Asset Class 3 years p.a. (basis points) 1 year (basis points) Budgeted value add 1 year (basis points) Portfolio Mix 81 83 70 Asset Class Mix 4-2 52 Security Selection 74 75 128 Total 159 157 250 9
FY18 What we got right Consistency with portfolio mix, stock selection good, but trailed off as the Financial Year came to an end. 500 400 300 200 100 0 10-100 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Security Selection 85 46 46 27 100 176 246 274 228 179 154 130 75 Asset Class Mix 54 57 58 62 53 28 28 36 23 35 19-1 -2 Portfolio Mix 82 92 85 93 102 97 80 99 100 64 77 79 83 Total 221 195 189 182 254 300 354 409 351 278 251 208 157 Portfolio Mix Asset Class Mix Security Selection Total
Stock selection positive across the board International equities stock selection benefitted from rebound in growth stocks in 2017 Australian equities on the improve. Sector Return 3 years p.a. 1 year Actual BM Diff. Actual BM Diff. Aust. Equities 9.6% 9.6% 0.0% 13.7% 13.2% 0.5% Intl. Equities 10.9% 9.9% 1.0% 16.3% 15.2% 1.1% Property 9.9% 11.4% -1.5% 8.2% 10.4% -2.2% Infrastructure 15.1% 14.1% 1.0% 12.6% 13.1% -0.5% Private Equity 12.7% 7.5% 5.3% 17.6% 8.8% 8.8% Credit 6.9% 5.1% 1.8% 5.9% 2.6% 3.2% Fixed Income 4.4% 3.6% 0.8% 2.8% 2.5% 0.3% Cash 2.4% 1.9% 0.4% 2.2% 1.8% 0.4% 11 Source: AustralianSuper.
Balanced option - how we re presently positioned Asset Allocation AustSuper* Median Rel Ave Rel Listed Equities 61.8% 56.0% 5.8% 4.8% Australian Equities 25.2% 23.5% 1.7% 0.2% International Equities 36.6% 32.5% 4.1% 4.6% Private Equity 3.7% 2.8% 0.9% 0.6% Unlisted Assets 22.9% 20.0% 2.9% 4.3% Property 7.1% 7.5% -0.4% 0.0% Infrastructure 11.0% 7.5% 3.5% 4.0% High Yield & Loans 4.8% 5.0% -0.2% 0.3% Fixed Income 3.3% 13.6% -10.3% -10.5% Cash 8.3% 7.6% 0.7% 0.8% Total 100.0% 100.0% Currency 22.0% 21.0% 1.0% 2.3% *Balanced Option as at 30 June 2018. 12
What are we worried about? It s The Big Three! 13
No. 1 End of Cycle: Is it 2019 or 2022? (2) Strong Economy (Fed tightens) (1) Economy picks up (Easy Policy) (5) Economy in recession (Fed Eases) (3) Economy slows towards recession (Fed tightens too much) (4) Share Market Crashes (Fed stops tightening) 14
No. 2 Trade Wars Get Out Control? Tariffs are back in fashion this is how it works Trump complains about US trade deficits Introduces tariffs, other countries respond We have no real idea how far it goes The IMF has had a stab at it though Modelling from 2016 shows an increase in global tariffs by 10% would lower global GDP 1.75% over a 5 year time horizon. 15
No. 3 Australian House Prices Crash? Index 2005 =100 Australian Housing Prices average Melb/Syd 220 200 180 160 140 1. Foreign Buyer Restrictions 2. Investor Lending Caps 3. Interest Only Loans Reduced 120 100 Three Strikes And You re Out! 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: AustralianSuper / Australian Bureau of Statistics (ABS) 16
So what is going to happen? The Big Three Risk 1. End of Cycle Inevitable, timing the issue High 2. Trade War Possible, hard to predict Medium 3. Housing Crash Unlikely Low 17
Thoughts for the next 12 months FY19 SAAs SAA High Growth Balanced Socially Aware Index Diversified Conservative Balanced Stable Listed Equities 72.0% 56.0% 56.0% 70.0% 40.0% 23.0% Australian 28.0% 22.0% 22.0% 32.0% 16.0% 9.0% International 44.0% 34.0% 34.0% 38.0% 24.0% 14.0% Private Equity 5.0% 4.0% 4.0% 0.0% 2.0% 0.0% Unlisted Assets 18.0% 21.0% 21.0% n/a 16.0% 16.0% Direct Property 6.0% 7.0% 7.0% n/a 5.0% 6.0% Infrastructure 10.0% 12.0% 12.0% n/a 9.0% 11.0% High Yield & Loans 2.0% 2.0% 2.0% n/a 2.0% 7.0% Fixed Interest & Cash 5.0% 19.0% 19.0% 30.0% 42.0% 61.0% Fixed Interest 2.0% 11.0% 11.0% 17.0% 26.0% 27.5% Cash 3.0% 8.0% 8.0% 13.0% 16.0% 25.0% Other Assets 0.0% 0.0% 0.0% n/a 0.0% 0.0% TOTAL 100% 100% 100% 100% 100% 100% Currency 30.0% 23.0% 23.0% 29.0% 16.0% 9.0% 18 AustralianSuper may change the strategic asset allocation or the composition of individual asset classes from time to time to suit prevailing market circumstances.
Thank you Please feel free to ask us questions.