Investment Update – June 2021

August 18 |  4 min

Despite the uncertainties associated with Covid-19, most of our investment options have seen strong returns in 2020/21. Our MySuper option (Balanced growth) achieved a very strong return of 19.05% in accumulation. The table below shows Balanced growth’s performance over periods ending 30 June 2021. Vison Super is ranked in the top 25% of MySuper options on a one, three, five and ten-year basis by SuperRatings.

 

Table1: Balanced Growth performance (periods ending 30 June 2021)
1-year 3-year 5-year 10-year
Return (annualised)19.05%9.23%9.95%9.00%
Ranking*Top 25%Top 25%Top 25%Top 25%
Rank*12th out of 50 options5th out of 49 options3rd out of 49 options8th out of 33 options

*This reflects the option’s rank in the MySuper component of the SuperRatings survey.
Source: SuperRatings Fund Crediting Rate Survey- SR50 MySuper Index, June 2021

Pensions has also seen a strong return, with the Balanced growth pension option returning 21.40% for the year ending 30 June 2021.

At the start of the 2020/21 financial year, the investment outlook was highly uncertain. The world had experienced the first wave of Covid-19 and was just beginning to enter the second wave. While equity markets had increased from their March 2020 lows, they remained much lower than their early 2020 highs. Importantly, global and Australian policymakers had moved quickly to provide cashflow support to businesses and households, with the aim of limiting the damage from the virus until vaccines could eventually be deployed.

Policy support helped to stabilise investment markets and allowed investors to become more confident about the future, even though the near term remained very uncertain. One key aspect of policy support was central banks cutting short-term interest rates to very low levels. For example, the Reserve Bank of Australia cut its rate to a record low of just 0.1%.

Even though COVID-19 in its various manifestations created considerable uncertainty, equity markets and riskier assets in general experienced exceptionally strong gains during the financial year – see the chart of the US equity market below. Initially the share gains were greater in those sectors that were expected to benefit from the pandemic (eg Amazon, because of increased online shopping). Once vaccines began to be approved (in late 2020), the relative performance of the economically sensitive stocks (eg banks) improved.

Source: Bloomberg

Another key development during the financial year was the US Democrats gaining the presidency and power in both Congress and the Senate in the world’s largest economy. This was important as it provided the platform for exceptionally large US fiscal stimulus packages. These packages underpinned very strong global growth in the 2020/21, along with the deployment of vaccinations, particularly in the developed world.

As Covid remains a material issue for investors, the investment outlook remains very uncertain. Our central case is that strong growth underpins further moderate gains in the price of riskier assets such as shares over the next 12 to 18 months. A key downside risk is that higher US inflation is more persistent than we expect, causing interest rates to rise sharply. There is also the possibility that the effectiveness of vaccines falls materially at some stage as new variants of the virus become dominant. On the upside, if inflation is well controlled and growth is stronger than we expect, the investment environment could be more favourable than our central case.

Over the next 10 years or so, we anticipate that investment returns will be materially lower than those achieved over the last decade This is because the valuations of riskier assets are generally quite high currently.

 

Investors should be aware that returns may go up and down, so past returns are not a guarantee of future performance.

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