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From the CEO: pension fund 2020/21 mid-year investment update

February 5th, 2021

After a turbulent 2019/20 financial year, it was heartening to see investment returns firmly in the positive for the first half of 2020/21.

Global share market performance was varied early in the 2020/21 financial year. As economies and businesses slowly started to recover from the impact of COVID-19, the US and China produced large positive returns, while the UK, Japan and Europe were negative in July and confidence was further affected by infection spikes in August.

Australian equities initially produced small positive returns, as GDP data confirmed our country was in recession but at the lower end compared to other countries.

The recovery of global equity markets showed signs of slowing in September 2020, following a long period of steady gains since April. Despite some market uncertainty around second waves of the pandemic in some countries in October, there was growing confidence month by month due to promising news of three vaccines, the result of the US presidential election, and low COVID cases in Australia. This led to strong investment performance in November, which carried through into the end of 2020 as international equity markets maintained their strength into 2021.

This meant our investment strategy was able to deliver a very solid first-half performance for First Super pension members, with the Balanced option (default) for the pension fund returning 6.96% for the six-month period.

Pension Fund Performance returns from
1 July to 31 December 2020*
Balanced 6.96%
Shares Plus   10.53%
Growth 9.18%
Conservative Balanced 5.16%
Cash 0.40%

*Past investment returns are not a reliable indication of future returns.

investment markets: Looking ahead

It appears share markets have fully priced in the likelihood of multiple vaccines controlling the spread of COVID-19. Globally, China and the US are continuing to recover their economic footing, while Europe remains sluggish and in the grip of the pandemic.

There are positive signs for Australia’s economic recovery, including a swell in retail sales and rising property prices. Strong commodity prices will also shore up the Australian dollar.

Unemployment fell and the economy gained 50,000 new jobs in December 2020, of which 35,000 were full time (according to the Australian Bureau of Statistics).

However, for some sectors and regions particularly the pandemic is having an ongoing impact. This is disproportionately affecting younger workers and industries still under COVID-19 restrictions, such as hospitality, the arts and tourism.

It’s expected that record-low interest rates will stay that way to encourage borrowers to increase their spending and businesses to hire more workers.

The world in 2021 is a different place than it was at the start of 2020, and our fund managers are aware of this.  Looking ahead, we will continue to actively review our investment strategy and manager performance during the post-COVID recovery.

Pleasingly, the long-term performance of the pension fund Balanced option, where most members are invested, remains strong – 8.25% over the 10 years to June 2020.

It’s these long-term returns that really count. While short-term results can be heavily impacted by what’s happening in markets in the present, strong long-term performance shows we’ve been able to successfully navigate similar ups and downs in the past.

You can find details of the performance of all our investment options on our Investment Returns & Crediting Rates webpage.