AustralianSuper Warns of ‘Low or Even Negative’ Returns

AustralianSuper, Australia’s biggest pension fund with A$165 billion ($115.1 billion) in assets, returned 8.67% for the fiscal year ending May 31, surpassing its projections that the median fund return would be 7.1%.

However, despite the “outstanding result” AustralianSuper CIO Mark Delaney cautioned investors not to focus on short-term results and warned them not to expect similar strong results in the future.

“We know that at some point in the future the fund will experience very low or even negative returns,” Delaney said in a release. “As we start to get closer to the end of the current economic growth cycle, members need to prepare themselves for that and not react to short-term fluctuations in returns in the future.”

For the financial year to May 31, AustralianSuper’s “Balanced” option was the top-performing fund over 10 and 15 years, and in the top 10 over all time periods.

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The balanced option has returned 10.72% a year over three years, 9.76% a year over 10 years, and 8.25% a year over 15 years. AustralianSuper said that A$50,000 invested with the Balanced option from July 2009 would now be worth A$126,921.

Delaney said underlying global political and economic uncertainty had created a complex investing environment in 2018.

“There were some tough months during the year and at times it looked like we would see relatively subdued returns,” he said. “However, there was resilience in infrastructure and property markets while falling interest rates also meant fixed interest did well.”

Delaney added that foreign currency rising against the Australian dollar also helped increase returns from overseas assets with “both domestic and international equities having a strong finish to the year.” He also said that long-term performance was still the most important consideration for members when it comes to their superannuation.

“Most members are usually better off sticking with their long-term strategy, providing it is right for their goals and circumstances,” he said.

AustralianSuper manages retirement savings on behalf of more than 2.3 million members from approximately 280,000 businesses.

Tags: Australiansuper, Economic Outlook, Mark Delaney, Pension, Returns, Superannuation Scheme

South Korea’s state pension fund reported an investment return of 6.81% for the first four months of the year, surpassing the 700 trillion won threshold in total assets under management for the first time in its 31-year history.

According to data compiled by the National Pension Service (NPS), the fund’s operator, the fund’s assets totaled 701.2 trillion won ($600 billion) as of April, up 62.4 trillion won from the end of 2018. That’s also up from 100 trillion won in 2003, 300 trillion won in 2010, and 500 trillion won in 2015. The NPS also reported that the fund has returned 5.4% annualized since its inception in 1988.

For the year until the end of April, the pension fund earned 9.97% from domestic equities, and 20.34% from investments in foreign equities, according to Yonhap News Agency. Meanwhile domestic and foreign bonds returned 1.42% and 6.68%, respectively, as alternative asset investments earned 3.46% for the year up to the end of April.

The NPS said that while its earnings reached 41.2 trillion won in 2017, it posted a loss of 6 trillion won last year due to intensifying trade disputes between the US, and tough financial market conditions, according to Yonhap. The NPS also said that due to the country’s rapidly aging population, which requires larger payouts, the pension fund could start recording losses in 23 years.

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South Korea’s fertility rate is expected to fall to an all-time low this year, according to a study commissioned by the Chosun Ilbo newspaper. The average number of babies born per woman of reproductive age is due to be as low as 0.96, bringing it below one for the first time in history.

In a move to counter the effects of a falling fertility rate, which include underfunded pensions, expanding debt, and economic decline, the Korean government unveiled proposals to help reform the country’s pension system in December. And late last year, the NPS said it would increase its ratio of risk assets, such as stocks and real estate, to 60% from 50%, and raise the ratio of overseas investment to about 45% from 30% in a move to help boost returns.

The fund’s manager said that at this stage of the fund’s maturity, the focus is on maintaining stable returns and diversifying risks by scaling down the allocation to domestic fixed income, while increasing the investment in domestic and foreign equities and alternatives under a portfolio diversification strategy.

Tags: National Pension Service (NPS), Pension, Returns, South Korea