Annual ReportYear in review
Year in Review
Investment markets go through cycles, and after a number of relatively stable years, in 2015-16 the market experienced several significant fluctuations.
The Chinese equity market fell sharply early in the financial year, correcting itself by December; however, a second fall occurred in January 2016, which also led to falls in other global markets.
Commodity prices also fluctuated. Oil began the financial year at approximately $60 a barrel, falling below $30 during the course of the year before recovering some ground. Similarly iron ore (measured by the Steel Index) rose to above $70 a tonne then fell below $35 a barrel, before recovering to steadier prices.
In late June, the United Kingdom voted to leave the European Union, and we saw further stock market falls. While Australia was not completely removed from the fallout, we were well insulated economically as our exports to the UK and Europe are far smaller than exports to China, the United States, Japan and the rest of Asia.
These factors, combined with record low interest rates, low inflation and persistent low growth in the world economy held down investment returns, impacting on balanced investment options for super funds across Australia.
Media Super’s Balanced (MySuper) investment option returned 3.0% for the 2015-16 financial year. In a challenging year for investing, the average return for super funds was 2.73%*, so your returns were better than most. Importantly, our Balanced (MySuper) investment option has returned members an average of 7.75%^ per annum since the global financial crisis.
For our pension members, the Balanced investment option returned 4.11%, performing above the average of 2.97%# for super funds in Australia, and placing us in the top 25% of pension funds#.
Our Balanced investment options (both MySuper and pension) are invested across equities (Australian and overseas), property and infrastructure, and fixed interest investments.
The global volatility in share markets in 2015-16 impacted on equity investment performance, which resulted in flat investment performance over the course of the year (as gains in some months were negated by losses in others).
Property and infrastructure continued to perform well, delivering very strong returns in 2015-16.
Given the continued rise in the value of global bonds, our fixed interest investments also provided strong returns.
Fluctuations are inherent to financial markets, and short-term losses can occur; but we invest through market cycles, with the objective of growing your assets over the long term.
We’re cognisant of the impact sharp falls in the share market can have on super and pension balances. In 2015-16 we continued to implement a ‘portfolio insurance’ strategy – using put options – to dampen the impact of significant market falls. Media Super is still one of the few funds with this type of strategy in place.
Given the current environment, we expect investment returns for 2016-17 to remain relatively low, unless and until global economic growth improves, and inflation and interest rates begin to rise.
But we remain confident that our investment strategy for the Balanced investment options (both MySuper and pension) are the right ones to help you achieve your long-term retirement goals.
If you have questions about your investment returns or want to discuss your investment options, our team is always here to answer questions and provide advice.
* SuperRatings Fund Crediting Rate Survey – Balanced options June 2016
# SuperRatings Pension Fund Crediting Rate Survey – Balanced options June 2016
^ * Investment warning: Investment returns are not guaranteed. Past performance gives no indication of future performance.
† Based on returns of the Balanced investment option from 1 January 1987 to 30 June 2016, after fees and taxes. Historical returns before 1 July 2008 are based on former Print Super investment returns.