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ANZ Smart Choice Super report: September 2021

Published 17th November 2021

Strong returns as economies continue to rebuild

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

ANZ Smart Choice Super Lifestage investment options’ 1 year performance (%)

 

Investment Option

3 months

1 year

3 years (p.a.)

5 years (p.a.)

1940s

1.09

8.67

4.90

4.71

1950s

0.91

10.78

5.67

5.62

1960s

1.22

16.54

7.23

7.42

1970s

1.38

20.19

8.16

8.67

1980s

1.42

21.95

8.56

9.26

1990s

1.42

22.18

8.62

9.38

2000s*

1.53

21.93

8.51

 



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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

* The inception of the 2000s fund was on 18 February 2017 so there is no performance data available for five years.

 

Based on your decade of birth, the table above shows how your investment option has performed in the September 2021 quarter (the ‘3 months’ figure), and over the past one, three and five years.

All of ANZ Smart Choice Super’s Lifestage investment options saw strong positive returns during the September 2021 quarter. While the spread of the highly contagious Delta strain still challenges societies and economies, strong vaccination progress has enabled re-opening and the extraordinary central bank stimulus measures we have seen since the beginning of the pandemic have continued to support the recovery of the global economy.

While the pace of recovery slowed in September, the economic recovery has continued, supporting earnings and boosting share market returns. In line with this, the Lifestage funds delivered very strong performance across the range, from 8.67% (for the most defensive 1940s investment option) and over 20% for the younger cohorts (1970s, 1980s, 1990s and 2000s funds that have a higher allocation to shares).

The SuperRatings survey groups funds together with similar allocations to growth and defensive assets. Over the quarter, the 1940s Lifestage option performed above the median manager and was in the top quartile performer, while the majority of the Lifestage cohorts have also outperformed the median manager across the year. ANZ Smart Choice Portfolio Manager, Manish Utreja, said “We remain committed to helping our clients secure their financial future by delivering strong and consistent returns over the long term that will keep them on the path to achieving their retirement goals.”

 

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1940s

1.09

8.67

 4.90

4.71


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1950s

0.91

10.78

 5.67

5.62


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1960s

1.22

16.54

7.23

7.42


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1970s

1.38

20.19

8.16

8.67


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1980s

1.42

21.95

8.56

9.26


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

1990s

 1.42

22.18

8.62

9.38


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  

Investment Option

3 months

1 year

3 years (p.a)

Return since inception (18 February 2017)

2000s*

 1.53

21.93

8.51

8.93


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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.  
* The inception of the 2000s fund was on 18 February 2017 so there is no performance data available for five years.

 

A portfolio mix set to deliver

Effective diversification is the cornerstone of ANZ Smart Choice Super’s Lifestage investment philosophy. The investment portfolio is built across a range of assets, including growth assets such as Australian and international shares, property and, more recently, alternative investments. It also includes defensive assets such as fixed interest and cash. Our lifestage model automatically strikes an appropriate balance between growing and protecting your super based on your age and timeframe to retirement.

 

Returns across Lifestages explained

Younger members (1990s and 2000s for example) are more heavily invested in growth assets such as shares as they have longer investment horizons and can navigate through the ups and downs of markets. These members have seen the largest increase in their super balances as economies and markets have rebounded strongly from the pandemic-driven lows. 

Older members (those in the 1940s to 1960s lifestage options) have also seen solid returns over the year. These members have more defensive assets in their portfolio, such as cash and bonds, so that their retirement savings are better  protected from  the inevitable large swings in returns we often see from growth assets. This defensive strategy helped shield assets during the pandemic recession when compared to the younger cohorts, but these members haven’t benefitted as much as younger cohorts from the rebound as more defensive assets have given back some of the gains.

Our ANZ Smart Choice Super – smart investments tool is easy to use and explains how you are invested over time.

ANZ Smart Choice Super choose your own investment mix performance (%)

 

Investment Option

3 months

1 year

3 years (p.a)

5 years (p.a.)

Australian fixed interest^

-0.25

-2.07

2.99

 

Australian shares

1.90

27.75

9.46

10.03

Global fixed interest

-0.88

-1.81

2.98

1.81

Global property

0.26

26.04

4.58

3.80

Global smaller companies

2.51

35.28

9.75

12.25

International shares (hedged)

0.42

25.03

10.09

11.72

International shares (unhedged)

3.89

24.82

11.93

13.57

Cash

0.10

0.38

0.74

1.00

Conservative

0.67

6.18

4.11

3.92

Moderate

0.66

10.29

5.40

5.59

Growth

0.91

15.88

6.97

7.51



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 30 September 2021 (p.a. = per annum). Past performance is not a reliable indicator of future performance.

^ The ‘Australian fixed interest’ fund’s inception was on 18 February 2017 and therefore the five-year performance data is not available.
 The ‘Global smaller companies’ investment option is not available to members of ANZ Smart Choice Super and Pension.

Over the year to 30 September 2021, returns were very strong across the ‘Choose your own’ range, spanning 25% to 35%, excluding Australian and global fixed interest which returned -2.07% and -1.81% respectively. The difference reflects the fact that investors have been encouraged to buy riskier assets such as shares on the back of the improved investment outlook, rather than fixed interest (bonds).

Over the quarter, returns for the growth asset options were positive, but more moderate than last quarter - ranging from 0.26% for the Global Property option to 3.89% for the International Shares (unhedged) option. The International shares (hedged) option returned 0.42% as the Australia dollar tracked lower during the quarter.

Defensive asset options had modest negative returns, ranging from -0.25% for Australian fixed interest to -0.88% for global fixed interest. Similarly, the conservative and moderate options delivered somewhat lower returns than the growth option over the quarter. 

You can access your ANZ Smart Choice Super returns across the full suite of investment choices online or by visiting the ‘Investment portfolio’ page via your ANZ Smart Choice Super account.

 

Market and economic snapshot

Recovery continues but at a more sustainable pace 

The global economy continues to recover from the short, sharp pandemic slump that occurred through the first half of 2020. While the pace of recovery has slowed back to a more sustainable pace from the 2020/21 surge, the outlook remains positive. That said, the global economy is facing into stronger headwinds with challenges including: 

  • the spread of the more contagious Delta variant 
  • China restructuring towards the consumer, including getting serious about curbing excessive debt-fuelled property speculation, with the crisis surrounding property developer Evergrande a prime example of this shift
  • soaring energy prices following supply shortfalls in commodities including gas and renewable energy production 
  • an intensification of consumer demand for goods, pressuring global supply chains and causing prices to rise.  
     

Let’s face into the headwinds 

Close to 50% of the world’s population now has some immunity to COVID-191. Steady vaccine progress has seen the pandemic become a much-reduced drag on economic growth - while the rapid spread of the Delta variant has been more challenging, vaccination rates have dramatically reduced hospitalisations and deaths. The pandemic isn’t over yet, but many parts of the economy have shown an ability to continue ‘business as usual’ with other sectors now benefitting from re-opening.

For China, new consumer focussed policies will hinder economic growth in the short term but mark a welcome re-orientation of the economy. Debt-led property investment has also pushed housing prices in China’s major cities to unsustainable levelswhich the monetary authorities are trying to address by cracking down on speculative property investments.

The severe shortage of electricity in China is due to a reduction in imported coal, weaker hydroelectric outputs due to drought, and government emission reduction targets that haveforced coal mines to close. The shortage has caused blackouts and a need for energy rationing and is another factor shifting China towards lower but more sustainable growth.

While concerns about a permanent lift in the price of goods and services (inflation) are credible, central banks have undershot their inflation targets for some time and are still committed to getting back to target ranges. We think the current lift in inflation is temporary, but should labour shortages and rising wages become permanent, inflation would rise well above the central bank targets. The key risk is of higher inflation becoming entrenched leading to policy support being withdrawn much more rapidly than currently expected. This would likely result in a rise in interest rates, slowing company earnings and share market disruption.

The demand for consumer goods remains high, but many sectors haven’t been able to get production back up and running quickly as economies have re-opened and this has caused prices to lift. We consider that supply chains will eventually respond and the spike in the price of consumer goods is likely to ease as supply is ramped up, although this could take some time. 

1 Our World in Data, Data as at 25 October 2021 - https://ourworldindata.org/covid-vaccinations

 

Putting it into perspective

While the headwinds we’ve outlined have contributed to the recent pause in markets, we shouldn’t forget the incredible bounce back we’ve seen since the pandemic-driven recession. Considerable, unprecedented levels of policy support were put in place to sustain the recovery so it’s expected that markets will become concerned that this extreme policy support will eventually be removed. 

Now Australia has relatively high vaccination rates, re-opening can begin. While slower Chinese growth may challenge the Australian economy, particularly as it has driven the recent plunge in iron ore prices, this has been offset by a surge in coal and gas prices. Although we don’t expect energy prices to continue to rise through to 2022, this price surge is supporting the Australian dollar and economic activity for now. We also consider the Reserve Bank of Australia (RBA) is likely to keep its interest rate policy highly supportive next year (2022) as the economy continues to heal. 

 

What may be ahead?

Most market challenges should ease in time. While the outlook has clearly softened, supports remains in place with policy still incredibly stimulative and expected only to be removed gradually. Economies are continuing to re-open and social distancing will become less of a growth inhibitor.  

This does not mean that the high ‘pandemic bounce back’, double-digit returns will last. We expect solid but more modest returns as the recovery matures - as growth eases and costs rise. 

We believe we’re a long way from any sharp drop in economic growth that would justify more caution and a much lower allocation to growth assets such as shares.  All up, it’s still a positive market outlook story.

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Smart Choice Super performance

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“ANZ Smart Choice Super” is a suite of products consisting of ANZ Smart Choice Super and Pension (PDF 189kB)ANZ Smart Choice Super for employers and their employees (PDF 186kb) and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees (PDF 198kb). The ANZ Smart Choice Super and Pension product is distributed by Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522). ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees are MySuper compliant products issued pursuant to the latest PDS available at anz.com/smartchoicesuper. ANZ Smart Choice Super is part of the Retirement Portfolio Service (the Fund) (ABN 61 808 189 263) and is issued by OnePath Custodians Pty Limited (ABN 12 008 508 496, AFSL 238346, RSE L0000673) (OPC), the trustee of the Fund. OPC is a member of the IOOF Group of companies, comprising IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. The Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522) brand is a trademark of ANZ and is used by OPC under licence from ANZ. ANZ and the IOOF Group of companies (including OPC) are not related bodies corporate. ANZ does not stand behind or guarantee these products.

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 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.

This information is of a general nature and has been prepared without taking account of your personal needs, financial situation or objectives. Before acting on this information, you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives.

This article was prepared and written by OPC.

All fees are subject to change. Other key features are relevant when choosing a super fund, including performance.

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Fee Analysis: Research conducted by SuperRatings Pty Ltd, holder of Australian Financial Services Licence No. 311880 at the request of OPC. For a copy of the latest SuperRatings research, click here (PDF 452kB) or call 13 12 87.

For more information, visit superratings.com.au. SuperRatings does not issue, sell, guarantee or underwrite this product. Learn more about SuperRatings' criteria.

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