AustralianSuper delivers return of -2.73 per cent in 2022 in first negative return since GFC

AustralianSuper has moved to reassure members it is focused on the long-term after posting its first negative return since the global financial crisis amid rising inflationary pressures.

However, the country’s largest super fund — with members’ assets totalling $261 billion — has warned a changing economic cycle will likely see “more modest returns” over the medium-term.

While the 2.73 per cent loss for its flagship balanced option over fiscal 2022 was not unexpected, it fired the starting gun on what is expected to be a string of underwhelming investment results as a host of funds — including Hostplus, Cbus and REST — report in coming weeks.

The loss followed a record high return of 20.4 per cent the previous year and was AustralianSuper’s first negative return since fiscal 2009, when it lost 13.3 per cent.

It was impacted by a disappointing share market performance; the benchmark S&P-ASX200 index finished 10.2 per cent lower for 2021-2022, pushing superannuation balances into the red for just the fifth time in 30 years.

AustralianSuper chief investment officer Mark Delaney said the loss was reflective of “challenging global investment conditions, heightened geopolitical tensions, rising inflationary pressures and interest rates over the past six months”.

He said the fund was focused on maintaining a long-term focus, noting members had received strong 10-year annual returns of 9.32 per cent on the balanced option, which nine out of 10 members are invested in.

“In our experience, reacting to short-term market volatility may see members worse off in the long run,” he said.

Mr Delaney said the economic cycle was changing and that he expected returns to be more modest over the medium-term.

“After more than 10 years of economic growth our outlook suggests a possible shift from economic expansion to slowdown in the coming years,” he said. “We have started to readjust to a more defensive strategy, as conditions become less supportive of growth asset classes such as shares.”

AustralianSuper’s result for 2022 came in just below expectations of Chant West. The superannuation research house has estimated the median growth fund, or one with between 61 per cent and 80 per cent exposure to shares and other growth assets, will report an average loss for the 2021-22 year of between 3 per cent and 3.5 per cent.

Chris Brycki, founder and chief executive of digital investment adviser Stockspot, noted there was a wide range of returns this year. Growth and high-growth options in some super funds — which many younger people are invested in — are down 8-10 per cent, he said. Stockspot also tracks super returns and fees.

Mr Brycki speculated big funds like AustralianSuper that have a large amount of unlisted assets, such as property and infrastructure, had not fallen by as much because they had not marked down these assets as much as listed equivalents.

“My concern would be for some of these funds that they’re hoping the asset values . . . of these unlisted assets would rebound as quickly as they did in March 2020, but in an environment of higher expected interest rates and inflation there may be markdowns in these assets still to come that haven’t been reflected in this year’s returns,” he said.

Mr Brycki also said it was “certainly in the interest of member retention to talk down returns”.

“Then it always looks like a positive surprise, but it doesn’t really help members understand the future is unknowable — which is the reality,” he added.

Australian Institute of Superannuation Trustees general manager advocacy Mel Birks said superannuation was a long-term investment.

“Although markets may fluctuate each year, history has shown that profit-to-member funds have on average produced annual returns of more than 7 per cent over the last 10 years,” she said.

“This highlights the importance of choosing well-performing super funds that deliver strong returns and charge low fees.”