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ANZ Smart Choice Super report: 2017-18


Published 25 July 2018

Your investments had positive returns in the past year despite unsettling political ‘noise’, explains Mark Rider.

In brief

  • Lifestage options recorded strong results in the 2017-18 financial year
  • While turbulent politics and trade wars hurt sharemarket returns, the global economic environment remained solid.
  • Super is a long-term investment, so take this into account when viewing your returns.

There has been lots of global political ‘noise’ in the past few months, causing investors' confidence to falter a little and at times this reduced the value of shares, where a large portion of most people’s superannuation is invested.

I’m in a lifestage option– how did my investment option fare?

Our lifestage members belong to investment options based on their decade of birth. In these investment options, younger members’ savings are mostly allocated to ‘growth assets’ (higher risk investments with higher potential returns), while ‘defensive assets’ (more stable, lower return investments) make up a larger share as members age.

As you can see in the table below, returns for the past 12 months were strongly positive for ANZ Smart Choice Super members in lifestage options. These ranged from 10.08 per cent for those born in the 2000s, through to 5.33 per cent for the more conservative 1940s investment option.

Before we get into more detail, a quick reminder: it’s always a good idea to have a long-term view on your super – it goes up and down to some extent, but in the long-term tends to track steadily higher.

ANZ Smart Choice Super lifestage investment options' performance (%)

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1940s

2.71

5.33

4.11

4.83

1950s

2.89

5.94

5.11

6.56

1960s

3.62

7.88

6.36

8.03

1970s

4.19

9.55

7.42

9.06

1980s

4.45

10.31

7.91

9.61

1990s

4.52

10.53

8.03

9.72

2000s

4.32

10.08


Note: Returns quoted use the unit price which is calculated using the net asset values for the relevant month end. Please note that all returns are after the deduction of investment fees. Reporting data is to June 30, 2018 (p.a. = per annum). Past performance is not a reliable indicator of future performance. The inception of the 2000s fund was on February 18, 2017 and therefore there is no performance data available for three and five years.

In the ‘1 year’ column you can see how much your investment option grew between July 1, 2017 and June 30, 2018.  The ‘3 months’ column shows returns for the second quarter of this year (April to June). In the last column, ‘5 years’, you can see the average annual returns for lifestage options over the past five years.

Market update

So why have your investments performed at this level?

One of the main reasons markets have performed well in the past year is that the US economy has been strong, even though there’s been some fears around the US central bank continuing to slowly raise interest rates to keep inflation in check. President Donald Trump’s tax cuts and greater spending are boosting business in the US, but ‘trade war’ tariffs have, at times, worked in the opposite direction.

In Europe, Brexit and political turmoil in Italy have impacted markets. However, despite the noise, the economic environment remains solid with company earnings increasing, supporting European sharemarkets.

Since the global financial crisis the Chinese government has deftly navigated its economy to a soft landing. The economy’s main engines have changed over the past decade, with growth increasingly driven by the consumer and the services sector and less so by construction and exports. The latter, nevertheless, remains critical for the Australian economy, particularly our resources sector. While we expect this to continue in the year ahead, risks on the horizon from a potential trade war with the US warrant caution.

While Australian business confidence is at a high level, low wage growth has held back spending somewhat, even though more of us are employed. With inflation remaining low, the Reserve Bank of Australia is likely to keep interest rates on hold for some time yet.

Looking ahead, ANZ’s chief investment office expects lower sharemarket returns as economic growth slows, US interest rates move higher and political risks remain. But prospects remain good for future growth and the sharemarket continues to offer superannuation investors better prospects for higher returns than bonds or cash.

Shares

It was a solid year for global shares, finishing up 11.5% in hedged terms. Economic and earnings data remained sound, but markets were increasingly challenged by political tensions and the escalating trade war.

 

US Shares

Positive earnings momentum and supportive economic data helped to lift returns despite the trade tensions with China.

European Shares

Brexit and Italy’s political turmoil buffeted markets but the economic environment remained solid.

Emerging Markets

Emerging markets have been strong performers this year, up 12.3%. However, recent US dollar strength, escalating trade war tensions and slower Chinese growth contributed to sharp falls in the June quarter.  

Australian Shares

Australian shares performed well this year. Despite headwinds of weak wages and inflation growth, and a further softening in the housing market, confidence measures remained above trend and the earnings outlook has brightened.

Fixed Interest (Bonds)

Bond markets struggled this year despite more caution from investors.

 

International Fixed Interest

The disparity between accelerating US growth and softening economic activity elsewhere limited the rise in global bond yields.

Australian Fixed Interest

Stronger returns in Australian fixed interest reflected subdued Australian wages and inflation and expectations that the Reserve Bank of Australia will hold rates for some time. 

International Property

International property and infrastructure have underperformed shares on the back of rising interest rates.

Australian Dollar / US Dollar

The gap between central bank rates in Australia and the US continues to push into negative territory as the US economy booms relative to Australia. As at June 30, $A1 bought US74c.

 

Source: JP Morgan, Bloomberg & ANZ Wealth. Yearly returns to 30 June 2018.

Index information: Global shares - MSCI World ex Australia Net Index (hedged to AUD) | US shares - US S&P 500 Total Returns Index | European shares - MSCI Europe | Emerging market shares - MSCI Emerging Markets (Net) in AUD | Australian Shares - S&P / ASX 300 Accumulation | International Fixed interest - Bloomberg Barclays Capital Global Aggregate (hedged to AUD) | Australian Fixed interest - Bloomberg AusBond Composite 0+ Yr Index | International property - FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged) | Infrastructure - FTSE Developed Core infrastructure 50/50 Net Hedged to AUD.

This information is issued by OnePath Funds Management Limited (OFM) ABN 21 003 002 800 AFSL 238342. OFM is a wholly owned subsidiary of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522 but is not a bank. The information is general in nature and does not take into account a potential investor’s personal needs, objectives and Financial circumstances. This information is not to be construed as investment or Financial product advice, and should not be relied upon as a substitute for professional advice. Before acting on this information, potential investors should consider the appropriateness of the information, having regard to their objectives, Financial situation and needs. Potential investors should read the relevant Product Disclosure Statement (PDS) available at onepath.com.au and consider whether the particular product is right for them. Although all the information in this document is obtained in good faith from sources believed to be reliable no representation of warranty, express or implied is made as to its accuracy or completeness. Whilst care has been taken in preparing this material, ANZ and its related entities do not warrant or represent that the information, opinions or conclusions contained in this document (“information”) are accurate. To the extent permitted by law, ANZ and its related entities do not accept any liability from the use of the information. Past performance is not indicative of future performance. The value of investments may rise or fall and the repayment of subscribed capital is not guaranteed.

I’m in the choose your own investment mix. How did my funds fare?

As you can see below, all ANZ Smart Choice Super members who chose their own investments saw positive returns for the 12 months ending June 2018.

The best-performing investment was the global smaller companies’ option, which delivered a 16.85 per cent return. This was followed by international equities (unhedged) at 13.66 per cent and then Australian equities at 12.42 per cent.

For those in multi-asset options the annual returns ranged from 4.29 per cent for the conservative option through to 8.35 per cent for the growth option.

ANZ Smart Choice Super Choose Your Own Investment MixPerformance

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

Cash

0.34

1.37

1.56

1.85

Conservative

2.08

4.29

3.68

4.31

Moderate

2.99

6.28

5.37

6.66

Growth

3.66

8.35

6.80

8.42

Australian equities

7.43

12.42

8.78

9.51

International equities (hedged)

3.17

9.90

8.75

11.11

Global property

7.01

5.01

7.05

8.32

Global fixed interest

-0.05

1.10

2.87

3.79

Australian fixed interest

0.52

1.98

Global smaller companies

6.43

16.85

10.19

International equities (unhedged)

4.90

13.66

8.46


Note: Returns quoted use the unit price which is calculated using the net asset values for the relevant month end. All returns are after the deduction of investment fees. Reporting data is to June 30, 2018 (p.a. = per annum).  Past performance is not a reliable indicator of future performance. Note the Australian fixed income fund’s inception was on February 18, 2017 and therefore the three and five-year performance data is not available. Similarly, International equities (unhedged) and the Global smaller companies started on May 25, 2015 so the five-year performance data is not available. The Global small companies investment option is not available to members of ANZ Smart Choice Super and Pension.

Members of ANZ Smart Choice Super for employers and their employees can access the latest returns across the full suite of investment choices online or by visiting the ‘Investment portfolio’ page via their ANZ Smart Choice Super account in ANZ Internet Banking.

(Note: The above investment returns are not applicable to QBE members. These members can access their individual returns via ANZ Internet Banking.)

How is your super tracking?

 



Mark Rider
Mark Rider is ANZ Wealth’s chief investment officer, responsible for delivering an overarching investment strategy, including asset allocation, investment themes, investment manager and product selection and monitoring for ANZ Wealth in Australia. Before joining ANZ in 2013, Mark spent 15 years at UBS and 10 years at the Reserve Bank of Australia, making him a well-recognised and respected member of the Australian investment community.

 

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ANZ Smart Choice Super is a suite of products consisting of ANZ Smart Choice Super and Pension, ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees (together ‘ANZ Smart Choice Super’). ANZ Smart Choice Super and Pension is a retail product issued pursuant to a Product Disclosure Statement (PDS). ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees are both MySuper compliant employer products issued pursuant to a separate PDS for employer plans and PDS for QBE.

ANZ Smart Choice Super is issued by OnePath Custodians Pty Limited (OnePath Custodians) ABN 12 008 508 496, AFSL 238346 and distributed by Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. ANZ is an authorised deposit taking institution (Bank) under the Banking Act 1959 (Cth). OnePath Custodians is the issuer of ANZ Smart Choice Super but is not a Bank. Except as set out in the relevant Product Disclosure Statement (PDS), this product is not a deposit or other liability of ANZ or its related group companies. None of them stands behind or guarantees the issuer or the capital or performance of any investment. Such investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.

ANZ Smart Choice Super and Pension received a Gold rating in SuperRatings’ 2019 product rating in both the Super and Pension categories. ANZ Smart Choice Super for employers and their employees received a Gold rating in SuperRatings’ 2019 MySuper product rating. SuperRatings does not issue, sell, guarantee or underwrite these products. Go to www.superratings.com.au for details of its ratings criteria.

This information is of a general nature and has been prepared without taking account of your objectives, financial situation or needs. Before acting on this information you should consider whether the information is appropriate for you having regard to your objectives, financial circumstances or objectives. ANZ recommends that you read the ANZ Financial Services Guide, the relevant Product Disclosure Statement, product and other updates which are available by calling Customer Services on 13 12 87, or visiting our website here or here (for employer members), and consider whether the product is right for you before making a decision to acquire or to continue to hold the product. 

Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice. The information on insurance cover is a summary only of the terms and conditions applying to the insurance cover. To the extent there is any inconsistency with the terms of the insurance cover provided by the insurer, the terms of the insurance policy will prevail. 

Before re-directing your super or moving your money into ANZ Smart Choice Super, you will need to consider whether there are any adverse consequences for you, including exit fees, other loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid.

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This information may be subject to change. Updated information will be available free of charge by calling Customer Services on 13 12 87.