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ART’s Balanced option for Super Savings accounts produced an after fees and superannuation tax return of 4.0% for the December quarter and 10.25% over the year to December 2023.

ART’s Balanced option for Super Savings accounts produced an after fees and superannuation tax return of 4.0% for the December quarter and 10.25% over the year to December 2023.

Up to date as of January 2024

Longer-term returns remain strong, with the Balanced option posting returns of 8.3% p.a. over the last 5 years, and 7.9% p.a. over the 10 years to the end of December 2023. Other investment option returns can be found here.

The table below shows returns from the major publicly traded asset classes for periods to the end of December 2023.

Returns to end December 2023
(pre-super tax)
3 months
%
1 year
%
3 year
% p.a.
5 year
% p.a.
10 year
% p.a.
Cash (Bloomberg AusBond Bank Bill) 1.1 3.9 1.7 1.4 1.8
Australian Diversified Fixed Interest (Bloomberg AusBond Composite Bond) 3.8 5.1 -2.7 0.6 2.6
Global diversified fixed income (Bloomberg Barclays Global-Aggregate hedged to $A) 5.4 5.3 -3.1 0.5 2.6
Australian listed property (S&P/ASX 300 A-REIT Accumulation) 16.5 16.9 5.9 6.4 9.4
Global listed property (FTSE EPRA/NAREIT Developed, hedged to $A) 12.7 7.9 1.7 1.9 4.5
Australian shares (S&P/ASX 300 Accumulation) 8.4 12.1 9.0 10.3 7.9
Developed market shares, in $A unhedged (MSCI World ex-Australia) 5.3 23.2 11.8 13.6 11.7
Developed market shares, hedged to $A (MSCI World ex-Australia) 9.2 21.7 7.3 11.6 9.5
Emerging market shares, in $A unhedged (MSCI EM) 2.0 9.2 -1.1 4.3 5.5

Sources: Bloomberg, Australian Retirement Trust. Past performance is not a reliable indication of future performance.

Share markets end the year strongly…

Financial markets were buoyed by better news on inflation across a range of economies as well as signs that official interest rates were at, or close to, a peak and likely to fall over the coming year.

Share prices in the major developed markets rose sharply in the final quarter of 2023 and over the calendar year. US shares, led by the technology sector, outperformed shares in Europe, the UK and Japan over the quarter, while Japanese shares were the best performers over the calendar year.

Emerging markets share returns were mostly positive over the quarter, including some very large gains in smaller markets such as Argentina, Egypt, Pakistan and Peru. However, Chinese shares continued to struggle as concerns over the health of China’s property market persist. Those concerns also detracted from emerging market returns for the calendar year, despite some very strong returns among the smaller markets.

A rise in the Australian dollar against a range of developed and emerging market currencies detracted from the returns of unhedged international shares over the quarter. Over the calendar year however, a generally weaker Australian dollar contributed positively to unhedged share returns.

Australian shares also enjoyed a strong quarter, with healthcare, materials and financials shares producing double-digit returns over the quarter, more than offsetting losses in energy shares.


…while bond markets enjoyed a solid recovery

Australian and global fixed income returns were positive over the quarter as yields declined in most major world bond markets (bond prices rise as yields fall).

The rise in bond prices over the quarter also led to a sharp improvement in bond returns over the year, both in Australia and globally. Lower bond rates boosted returns from listed real estate securities over the quarter, as lower bond yields tend to increase the relative attractiveness of the income provided by listed real estate investments.

Recent data has pointed to a further easing in inflation pressures, prompting most central banks, including the Federal Reserve and the European Central Bank, to keep official interest rates unchanged over the December quarter, while signalling the possibility of rate cuts over the coming year. In contrast, the Reserve Bank of Australia opted to raise rates further, taking the cash rate to 4.35% - its highest level in twelve years.


The outlook and what is ART doing?

The challenge facing the world’s central banks remains an extraordinarily difficult one: bring inflation back under control over a reasonable timeframe without causing a major economic downturn in the process.

While a further cash rate increase here in Australia is possible over the coming months, inflation is falling, the pace of interest rate increases across the world has clearly slowed and the monetary policy tightening cycle may be close to an end.

However, labour markets generally remain very tight, and there remains a risk that faster growth in wages and labour costs will result in inflation remaining at unacceptable levels. On balance, we remain of the view that medium to longer-term inflation is likely to be somewhat higher than we saw in the pre-COVID years.

We do not design portfolios based on our own or anyone else’s short-term economic, market or geopolitical forecasts. And we have no way of knowing with any certainty how far or how quickly inflation will fall from here or when interest rates will peak. However, our investment team and our external investment managers do seek to capitalise on opportunities that inevitably emerge during times of heightened market volatility, such as we are currently experiencing.

ART continues to hold a substantial allocation to alternative assets, particularly the key unlisted asset classes – real estate, infrastructure, private equity and private debt. As a large superannuation fund, we have well-diversified portfolios of these assets that we expect will deliver strong, long-term returns, while reducing our members’ exposure to share market volatility.

During the quarter, our infrastructure team made an additional investment in AirTrunk, a leading provider of data centre facilities across the Asia Pacific region.

In real estate, we added to our investment in UK aged care through our partnership with Elevation Healthcare Properties and made a new investment into the largest budget hotel and hostel platform in Europe – a business with 40 assets across 10 countries.

Our private equity team made an investment in LMS Energy, an Australian provider of bioenergy and methane abatement solutions.

In our private debt portfolios, we continue to source attractive opportunities in private direct lending to middle market corporates in Europe, providing debt funding to: a leading insurance broker; a manufacturer and distributor of dental prosthetics and orthodontic products across Western Europe; and a solar energy company. We also partnered with a new investment manager to allow us to expand our corporate direct lending in Europe.

We have continued to adjust our Dynamic Asset Allocation (DAA) strategy in response to changes in relative value between asset classes, as well as individual countries’ bonds, share markets and currencies. During the quarter we reduced our exposure to bonds as bond prices rose, reversing some of our earlier purchases of US and UK government bonds.

At the end of 2023, our DAA strategy slightly favoured shares over bonds. Within DAA’s shares allocation, we preferred Japanese, UK and European shares over shares in the US and Australia. In fixed income, we remain underweight in European and Japanese bonds. We are broadly neutral on US bonds after reducing our exposure during the quarter; and remain modestly overweight in UK and Australian bonds. And the DAA strategy’s currency exposure favours the Scandinavian currencies, the Malaysian ringgit and the Japanese yen over the Canadian and New Zealand dollars, the Czech koruna and the euro.

Help to choose your investments

There are a number of ART investment options that give exposure to a diversified range of asset classes, including both public market and unlisted investments. In fact, ART offers members a range of 19 investment options to allow you to tailor your investments to your needs.

If you want more information or advice to decide which investment option or group of options best meets your needs, our financial advisers are here to help.

Employees in the Australian Retirement Trust group provide advice to members and employers as representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818 AFSL No. 227867) (SFS), that is wholly owned by the Trustee as an asset of Australian Retirement Trust. SFS is a separate legal entity responsible for the financial services it provides. Eligibility conditions apply. Refer to the Financial Services Guide at australianretirementtrust.com.au/fsg for more information.

Past performance is not a reliable indication of future performance. Australian Retirement Trust employees provide advice as representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818 AFSL No. 227867) (SFS), wholly owned by the Trustee as an asset of Australian Retirement Trust (ABN 60 905 115 063). The Australian Retirement Trust Super Savings Balanced option adopted the pre-merger investment strategy of the Sunsuper Balanced option from 28 February 2022. The Super Savings Balanced option has identical investments to the Balanced Pool in the Super Savings Lifecycle Investment Strategy. Members invested in the Lifecycle Investment Strategy are invested 100% in the Balanced Pool until age 55.

Australian Retirement Trust Pty Ltd ABN 88 010 720 840 AFSL No. 228975 Australian Retirement Trust ABN 60 905 115 063

This document has been prepared and issued by Australian Retirement Trust Pty Ltd, the trustee of the Australian Retirement Trust. It contains general advice and does not take into account the investment objectives, financial situation or needs of any particular individual. You should consider if the advice is appropriate to your own circumstances before acting on it. Outcomes are not guaranteed. Past performance is not a reliable indication of future performance. You should also consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before deciding to acquire or continue to hold any financial product. We are committed to respecting your privacy. Our privacy policy sets out how we do this. For a copy of the PDS, TMD or Privacy Policy, please phone 13 11 84 or go to our website.