Strong 2020 results
Despite the difficult market conditions, Vision Super has delivered strong results. Our pension option was the number one performing option in the country, and our default Balanced growth option (where most of our members are invested) had a modest positive return of 1.96% for the year ending 30 June 2020.
While this wouldn’t be a great achievement in other years – Balanced growth has returned a healthy 8.13% over ten years – with the current pandemic and resulting economic downturn, it’s a solid return in context and puts us in the SuperRatings’ top ten performing MySuper options for 1, 3, 5, 7 and 10 years:
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We also had the top result of any option of any fund with our Innovation and disruption option returning 44.9% for the year ending 30 June – an outstanding result in any year, but particularly exceptional when returns are so low. Innovation and disruption allows members to invest in leading-edge innovating companies across industries like technology and health care – industries that have out-performed during the current crisis.
The June quarter was very strong for risk assets, equities and credit, following a sharp meltdown at the end of the March quarter due to the COVID-19 pandemic. The background to the strong quarter was massive fiscal and monetary stimulus from countries that could afford to undertake it. The US Federal Reserve printed more money over the June 2020 quarter than over all of 2008 and 2009 combined. The US government announced spending measures of 10% of GDP, stimulating the economy over the same period. Packages in other developed nations, including Australia, were of a similar scale.
The bottom for equity markets was on 23 March. April saw strong returns for equities as markets continued to factor in good news and benefitted from surging liquidity. April saw Italy and other European countries begin to contain the virus, and developed countries’ governments and central banks increase stimulus. Technology companies continued to benefit throughout the quarter as online activity continued to ramp up. The announcement by the US Federal Reserve in April that it would buy high yield bonds unfroze credit markets and led to a strong rally in credit.
May saw a continuation of strong markets as lockdowns continued to have an impact on infections across the developed world, with new cases falling in most major economies including the US. As developed nations began to ease lockdown, economic data improved, with retail sales beginning to rebound sharply albeit from low levels and markets continued to surge.
Confidence also began to rise that effective treatments for the virus would be found and eventually a vaccine.
June was less positive for most markets. Markets peaked early in the month as it became clear that some countries had come out of lockdown too early (notably the United States) while less developed countries continued to see a surge in new cases. Volatility in markets gradually eased over the quarter.
We expect that interest rates will remain very low for some time and that governments will continue to supply fiscal stimulus to try and sustain their economies. Recent events indicate how difficult it is to emerge from lockdown and keep the virus under control, with many communities experiencing second waves. A breakthrough in vaccine or treatment would be very positive for our investments. For many emerging nations, suppression is unlikely to be possible and huge public health crises (potentially followed by a significant level of immunity in the population) looks likely. This will lead to additional stress in global economies and we are likely to see tensions rise, for example US-China tensions, and a possible flare up in the trade war. For Australia, the tensions between our largest trading partner and our strongest ally are particularly problematic and we have already seen some adverse consequences in our trading relationship with China.
From a markets perspective all this is likely to mean an elevated level of volatility but a return to the extraordinary market conditions of March 2020 is unlikely.
Disclaimers: Past performance is not an indication of future performance.
The risk rating of Innovation and disruption is very high. This option is designed for members who are prepared to accept an aggressive asset allocation with the potential for high returns, but an increased risk of a material negative return. If you want further information or advice on selecting the right investment option for your life stage and risk tolerance, please call our Contact Centre on 1300 300 820 to make an appointment to speak with a financial adviser.