The first quarter of 2023 was full of contradictions.

Initially, there was suggestion that inflation pressures were easing, meaning a slowing — or even an end — to the steep series of interest rate rises.

Yet interest rates and inflation remained elevated and that is typically bad news for investment markets.

To add to this, tensions between the US and China showed no sign of easing. Russian forces continued to hammer at Ukrainian positions in Bakhmut.

Then to make things worse, the tail end of the quarter saw a series of cracks in the US banking system with the collapse of Silvergate Capital, Signature Bank and the Silicon Valley Bank (SVB).

All three banks had made significant risk management errors, some of which included: running their bond portfolios unhedged, diving into cryptocurrency or tying their fortunes too closely to tech stocks battered by rising interest rates. When giant Swiss bank, Credit Suisse, also came under pressure, markets feared a repeat of the 2008 global financial crisis.

Fortunately, prompt action from regulators in the US and Switzerland held off the crisis. And, despite all these negatives, investment markets showed remarkable resilience.

Unhedged Global Shares were up nearly 9% for the three months to end March 2023. Unhedged emerging market shares beat the 5% mark. Over the same period, Australian shares were up 3.5% The local and global bond market also had a return, delivering returns of 4.6% and 2.4% (hedged) respectively.

What we achieved for members

MLC’s MySuper Growth Portfolio continued to generate highly competitive returns over the March quarter.

The three-year return — of 9.87% per annum to end March 2023 — puts MLC’s MySuper Growth Portfolio in the top 10 investment options surveyed in the SuperRatings Fund Crediting Rate Survey - SR50 MySuper Index to March 2023.¹

Performance over 5 years — at over 6.5% per annum^ — also ranks the MLC MySuper Growth Portfolio in the top ten investment options.

The outlook and how we’re driving returns

Despite the strong March quarter market performance, we remain cautious about the economic environment.

Our view is that the high interest rate environment is likely to persist, and this will weaken global growth. Strategically we are seeking to invest in assets that are likely to be resilient in an environment of slowing economic growth as well as assets that can act as a hedge against high inflation such as property and infrastructure..

However, we also believe that further weakness in economic activity and volatility in sharemarkets could provide opportunities to buy quality assets at discounted prices.

When investing for our members — people who are looking to build wealth for decades — opportunities to buy high-quality assets when relatively cheap, can turn short-term volatility into a highly positive outcome.