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MySuper investment performance update

Interview with Steve Gamerov, Head of Diversified Portfolios

Performance update for quarter ending 30 September 2021

We sat down with Steve Gamerov (Head of Diversified Portfolios) who leads the investment team responsible for managing the MLC MySuper portfolios. He answered three questions that are top of Fund members’ minds about recent performance, portfolio positioning, and the outlook.

What’s been driving returns in the MySuper portfolio?

Investment diversification is the heart of MLC’s investment approachThis means that we spread Fund members’ super contributions across many different types of investment assets, across many regions and countries. By doing this, we spread risks and access returns from many sources, rather than relying on any single investment to drive MySuper portfolio returns.

I’m pleased to be able to report to members that investment diversification continued to serve the MySuper portfolios well in the three months, as well as the 12 months, ending 30 September 2021.1

  • In the MLC MySuper Growth option, in which most members are invested, the return was 2.1% for the three months ending 30 September 2021.1 The 12 months to 30 September 2021 return was a very strong 20.0%.1

    Digging into the key return drivers: MySuper has benefited from strong Australian and global share market performance, which has been a feature of much of the past year.

    Private equity, which are investments in privately owned companies, rather than those listed on share markets, was also a stand-out performer.

    Alternative investments, being investments with different return profiles to share markets, also contributed importantly to returns.

How are you positioning the MySuper portfolio in this environment?

The environment is quite unusual and challenging at the moment, as we emerge from the COVID-19 crisis with interest rates being very low, and government bond prices being very high. Share markets have risen to high levels too.

As such, we’re continuing to evaluate assets to identify opportunities that can provide attractive returns without exposing members’ money to undue investment risk within the MySuper portfolios. Many of these opportunities are in areas such as real estate, infrastructure and lending, which we are accessing through our network of relationships across the globe.

  • I’ll touch on three such areas of opportunity.

    The first is commodities – investments in metals, mining, oil, gas and even soft commodities like wheat and coffee. We’re currently seeing strong upswings in commodity prices as economies around the world come out of COVID-19-related shutdowns and slowdowns. We think some commodities exposure is likely to provide a level of protection against the risk of rising inflation and that’s why we’re increasing the exposure to commodity investments within the MySuper portfolios.

    We’re continuing to increase the MySuper portfolios’ allocation into infrastructure assets as we’ve been able to find attractive investment opportunities. Furthermore, a number of our recent infrastructure investments have been structured with especially favourable fee arrangements, which is another positive for members.

    The MySuper portfolios are invested in infrastructure assets ranging from water utilities, telecommunications transmission towers, airports, rail, and energy, including renewable energy.

    We know that many members are interested in renewable energy and I am pleased to be able to tell them that their MySuper portfolio is an investor in Australia’s largest renewable energy company PowAR, which recently became even bigger after buying Tilt Renewable’s Australian business.

    The rise in renewable energy production is part of the global trend towards the gradual decarbonising of economies. Commitments that governments, including the Australian government, made at the Glasgow Climate Change Conference are an important part of this shift.

    We believe that the MySuper portfolios’ sizeable renewable and low emissions investments can provide potentially  good-long term returns for members while also contributing to  gradual decarbonisation.

    Finally, more members’ capital has gone into ‘alternative investments.’

    Investments are termed ‘alternative investments’ when they have return patterns that are significantly different from those associated with share markets or bonds. They also have other unique features that makes them very different from share or bond investments. Examples of this include lending to companies in need of capital in return for attractive levels of interest while having our lending backed by secure assets of these companies.

What are your views on the investment outlook?

The global economic recovery looks set to continue, albeit probably a slower pace than the last 12 months. As the economic recovery consolidates, there’s a possibility that central banks, like the Reserve Bank of Australia, and the US Federal Reserve, will wind back some of the emergency policies they rolled out in April 2020.

Inflation is arguably the biggest issue investors are having to come to grips with. Inflation has been low for most of the past 30 years, and so we haven’t had to really think about it. However, it has kicked up with the economic recovery and recent spate of supply side bottlenecks across the globe.

  • Major central banks seem to be of the view that the current run-up in inflation is temporary and will drift lower once all industries return to ‘normal’ and imbalances of supply and demand, for such things as semiconductors for cars, for example, get ironed out.

    Others, especially in the investment community, are of the view that higher inflation may be with us for longer than central banks are currently saying.

    We are optimistic on the growth outlook but are also cautious particularly with regard to the inflation outlook, which is why we diversify the MySuper portfolios to navigate the uncertain environment we are in. Our commodity, infrastructure and property holdings are examples of investments that we believe can do well in a higher inflation environment.

    At the same time, the MySuper portfolios are exposed to investments that will benefit from a continued recovery in growth across the globe as we hopefully all emerge from the depths of the COVID-19 induced crisis.

Latest investment returns to 30 November 20211

 

MySuper2
Returns (%)
Annualised Returns (% p.a.)
1 month 3 months 1 year 5 years 10 years
MySuper Growth Portfolio 0.8% 0.5% 14.8% 8.6% NA3
MySuper Conservative Growth Portfolio 0.6% 0.1% 9.6% NA3 NA3
MySuper Cash Plus Portfolio
-0.1% -0.1% -0.4% NA3 NA3
 

MLC Diversified Funds

To get more information on your investment options click here.

         
MLC Horizon 1 Bond Portfolio -0.1% -0.4% -0.3% 1.3% 2.0%
MLC Horizon 2 Capital Stable Portfolio 0.7% -0.2% 6.1% 4.6% 5.2%
MLC Horizon 3 Conservative Growth Portfolio 0.8% -0.1% 10.0% 6.6% 7.1%
MLC Horizon 4 Balanced Portfolio 0.9% 0.1% 14.8% 8.9% 9.2%
MLC Horizon 5 Growth Portfolio 1.0% 0.2% 17.9% 10.1% 10.4%
MLC Horizon 6 Share Portfolio 1.3% 0.4% 21.1% 11.9% 12.0%
MLC Horizon 7 Accelerated Growth Portfolio 1.3% -0.1% 28.0% 15.1% 15.1%
5.55%

1 Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. The performance returns in this communication are reported after deducting investment fees and tax but are before deducting administration fees and costs. Performance returns are annualised for periods greater than one year. For details of relevant fees and costs, refer to the PDS and Investment Menu.

2 MLC MySuper uses a combination of the three investment portfolios (MySuper Growth, MySuper Conservative Growth, MySuper Cash Plus), to provide a mix of growth and defensive assets which changes depending on your age. When you’re under age 55 you’ll be 100% invested in MySuper Growth. From age 55, we add a second portfolio, MySuper Conservative Growth, where a portion of your MySuper balance will be invested. Shortly after you turn 62, you’ll be invested across three portfolios, with a portion of your MySuper balance invested in MySuper Cash Plus.

The MySuper investment strategy changed from a single diversified to a lifecycle strategy on 22 March 2019. The returns for the MySuper growth portfolio for the period before 2019 are based on the previous single diversified investment strategy. The return for 2019 is based on the return achieved from 1 July 2018 to 22 March 2019 with the single diversified strategy, and the return achieved from 23 March 2019 to 30 June 2019 is based on the lifecycle investment strategy. The return for 5-years is based on return of the MySuper product over that period which had different investment strategies.

3 The MySuper Conservative Growth and MySuper Cash Plus are new portfolios that were formed when the MySuper product investment strategy changed to a lifecycle strategy on 22 March 2019. Therefore there is no 5-year performance history for MySuper Conservative Growth and MySuper Cash Plus portfolios.

Please note that the table above shows investment performance for the most recent calendar month for which data is available. However, performance commentary on this page relates to the most recently completed calendar quarter; for example - for the three months ending 30 September 2021.

Important information

This information is provided on behalf of MLC Investments Limited ABN 30 002 641 661 AFSL 230705)(“MLCI”) as responsible entity of a series of MLC managed investment schemes and NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as Trustee of the MLC Super Fund ABN 70 732 426 024. MLCI and NULIS are part of the IOOF Group of Companies, comprising IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate (IOOF Group).

This information is general in nature and has been prepared without taking account of an investor’s objectives, financial situation or needs. Because of that, investors should consider obtaining independent advice before making any financial decisions based on this information.

Investors should obtain the relevant Product Disclosure Statement before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available on mlc.com.au or plum.com.au.

Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market.

Any opinions expressed in this presentation constitute our judgement at the time of issue and are subject to change. MLCI and NULIS believe that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this presentation. Any projection or forward looking statement (‘Projection’) in this communication is provided for information purposes only. No representation is made as to the accuracy or reasonableness of any such Projection or that it will be met. Actual events may vary materially.

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