Investment performance and economic update: October 2024

Australian Retirement Trust (ART) Chief Economist Brian Parker recaps our long-term investment performance. 

ART’s QSuper Outlook portfolio, which is the MySuper default option for QSuper account holders under the age of 45, produced returns of 3.7% over the September quarter and 12.5% over the year to the end of September 2024.  

Longer-term returns remain solid, with the Outlook option producing a return of 7.3% p.a. over the 10 years to the end of September 2024. Returns for QSuper Lifetime and other investment option returns can be found here. 

We introduced a streamlined suite of investment options, available to all members from 1 July 2024.  

Members can choose from 15 carefully constructed investment options that cover a broad range of objectives, levels of risk and investment timeframes to suit their individual needs. 

Information on all QSuper investment options can be found here. The table below shows returns from the major publicly traded asset classes for periods to the end of September 2024.

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

Share markets start the year strongly …

Global share markets in aggregate produced positive returns over the September quarter and very strong returns over the year to September 2024.

Lower inflation, moves by the world’s central banks to lower official interest rates, and the expectation of a ‘soft landing’ for the global economy provided a positive environment for financial markets, despite ongoing geopolitical concerns. 

Most major developed share markets gained over the quarter, with shares in Australia and the US outperforming those in the UK and Europe. However, Japanese shares fell over the quarter as the Bank of Japan again moved to raise official interest rates and a stronger yen weighed on the performance of Japanese exporters.  

Emerging markets shares also performed well over the quarter, generally outperforming shares in the developed world. Shares in China, Argentina, the Philippines and Egypt were the best performers while share prices declined in Korea, Turkey and Poland.  

The entirety of the quarterly rise in Chinese share prices occurred in the final week of the quarter after the People’s Bank of China announced a series of aggressive monetary policy steps to boost China’s economy. 

The Australian dollar rose in value against a range of both developed and emerging currencies over the quarter and over the year to September, detracting from unhedged international share returns. 

Australian shares were among the world’s best performers over the quarter as share prices for materials and consumer discretionary companies rose strongly.    

Global and Australian bonds reported good returns over the quarter and the year to September as yields fell (and bond prices rose) in most of the world’s major bond markets. Inflation pressures across much of the world have eased, allowing many central banks, including the US Federal Reserve, the European Central Bank and the Bank of England, to lower official interest rates.  

However, in Australia, progress in returning inflation to target has been somewhat slower than in other economies and the Reserve Bank of Australia (RBA) has signalled that a reduction in the official cash rate is highly unlikely in the near term. 

Lower bond yields helped to boost the performance of Australian and global listed real estate securities (REITs) as lower bond yields boost the relative attractiveness of the income from REITs.  

While Australian REITs were the best performing publicly traded asset class over the year to September, over half of the 45.9% return was accounted for by one company – Goodman Group, who continue to benefit from strong demand for industrial property. 

The outlook and what is ART doing?  

While inflation has declined across much of the world, including in Australia, it remains generally above central bank policy objectives. While we expect inflation rates to fall further, those falls are likely to be gradual.  

This is particularly significant as tight labour markets are continuing to put upward pressure on wages and hence labour costs in services industries where inflation rates have remained stubbornly high.

The world’s major central banks have been reducing interest rates and further reductions are likely over the coming months. However, the RBA is likely to delay any reduction in the official cash rate until the first half of 2025, in response to a lack of adequate progress in bringing inflation down.   

At ART we do not design portfolios based on our own or anyone else’s short-term economic, market or geopolitical forecasts. However, our investment team and our external investment managers do seek to capitalise on opportunities that inevitably emerge during times of heightened market volatility.  

We have continued to adjust our Dynamic Asset Allocation (DAA) strategy in response to changes in relative value between asset classes over the September quarter and will continue to do so as opportunities present themselves.  

During the quarter, we raised our equities exposure when share markets fell sharply in August and subsequently reduced our exposure as markets recovered. Our holdings of sovereign bonds have been reduced as yields have fallen. 

At the end of September 2024, our DAA strategy 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 overweight in Australia and the UK, and have an underweight position in US, European and Japanese bonds. The DAA strategy’s currency exposure favoured the Norwegian krone, the Swedish krona, the Taiwanese dollar, and the Japanese yen over the Canadian dollar and the Swiss Franc, the Czech koruna, and the euro. 

ART continues to hold a substantial allocation to private 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 entered into agreements to sell ART’s interests in two assets: Queensland Airports Limited, which owns and operates airports in Townsville, Longreach, Mount Isa and the Gold Coast; and AirTrunk, a leading Asia-Pacific data centre business, subject to some approval processes. When settled, this will realise substantial profits for ART members. 

Our private equity team made commitments to several external managers to continue building a highly diversified portfolio of global private equity companies.

Commitments were made to another US based fund focusing on investments in smaller to medium sized healthcare, industrial and technology-enabled services companies as well as an Australia based buyout fund focusing on middle market investments in Australia and New Zealand.

Investments were made in a range global companies including Jinjer, a Japanese provider of cloud-based human resource management software.

Our real estate team has added to our UK aged care property exposure by committing additional capital to Elevation Healthcare Properties. 

Help to choose your investments

How your super is invested can have a big impact on what you'll have in retirement. Our online advice tool, or speaking with a financial adviser, can help you select the right blend of QSuper investment options for you. Advice about your QSuper account is included with your membership. Book an appointment today online or call 1800 643 893.

 

Past performance is not a reliable indication of future performance. QInvest Limited (ABN 35 063 511 580, AFSL 238274) is a separate legal entity responsible for the financial services it provides. Eligibility conditions apply. Refer to the Financial Services Guide for more information.