Despite ongoing volatility, financial markets closed the June quarter on a positive note, with Rest’s Core Strategy delivering gains of +3.35% over the June quarter and +5.96% for the year ending 30 June 2019, and +8.95% p.a. over the 10 years to end June.

Rest’s investment approach is different from some other super funds as we actively manage our portfolio based on opportunities and risk, and focus on long-term performance rather than shorter-term growth. In recent times markets have appeared stretched, with heightened volatility. Therefore, we have adopted a more defensive position in Core Strategy than some other comparable funds^, with a reduced exposure to share markets (about 40% allocation as at 30 June 2019). Although this means that we will not benefit as much from any short-term share market growth, it also means we will not be as impacted should a significant downturn occur. Should markets fall we would also have cash reserves available to pick up assets at better value.

Rest has followed this risk-managed, long-term investment approach for many years and it has served members successfully during previous periods of market turmoil such as the GFC.

Members who wish to adopt a different risk profile to the Core Strategy are able to choose from a range of other options with higher or lower risk exposures.

Contact our Advice team to learn more or to discuss investment options.

Past performance is not an indicator of future performance.

Based on SuperRatings Fund Crediting Survey-SR 50 Balanced (60-76) Index.

Investor whiplash

The financial year may have ended with equity markets back at all-time highs, but it’s been a volatile ride.

Trade wars, trade truces, Brexit, tensions in Iran, North Korea, global monetary policy reversals, negative interest rates, Aussie election surprises, oil price spikes, runaway iron ore prices, a financial services Royal Commission, slowing global growth; the year had something for both market bulls and bears.
 

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The central bank game changer

International shares, as measured by the MSCI All Country World ex Australia Index (unhedged in AUD), climbed +5.2% over the June quarter with US equities again leading the way.

Investor confidence was bolstered by the shift from selective tightening to universal easing across the globe. From Europe to Japan, Australia, China, and New Zealand - Central Banks demonstrated a willingness to actually, and pre-emptively, cut rates in order to stem rising risks from deflation, trade threats and a slowing global economy.

After successive rate hikes through most of 2018, even the US Fed opened the door to a rate cut this year - providing assurances to markets that it too, was willing to prolong the expansion.
 

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Advancing Australia

Aussie financial markets showed remarkable resilience in the face of weak economic growth, worsening US-China trade relations, and cooling property prices.

The S&P/ASX300 Accumulation Index climbed +8.0% over the quarter, and +11.4% over the year ending 30 June. Sentiment here was lifted by the surprising pro-investment Liberal party win, measures to boost housing, and the RBA’s back to back rate cuts – with the potential for more to come.

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Recovery back on track?

While it’s never a good idea to bet against Central Banks, keep in mind too, monetary policy is a blunt tool.

Too low for too long interest rates can have unintended consequences, including widespread price distortions and asset bubbles. And, more and more, this recovery looks to be about cheap debt, not economic fundamentals.

Key risks abound too. Conflict with Iran, US 2020 elections, US-China trade tensions, Brexit, a slowing China, are just a part of a long list of ongoing uncertainties that have the potential to quickly derail investor confidence.

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Looking ahead

There’s more to financial markets than equities. And, if history’s any guide, periods of above average returns, tend to be followed by periods of below average returns.

Even if this doesn’t prove the case (again for equities) this year, in line with our mantra of staying long-term focused, well diversified and disciplined, we see good reason to keep our relatively defensive Core Strategy positions in place.

Our strong emphasis on protecting members’ investments against adverse economic and investment risks, continues to underpin why we are more defensively positioned to equities. A relatively large cash position means we have the “dry powder” to quickly act on opportunities as they arise and/or if markets correct.

Past performance is not an indicator of future performance.

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Special Focus: Rest takes full control of Collgar Windfram

Until recently, Rest had held 40% of Collgar Windfarm - the biggest renewable energy producer in Western Australia (accounting for 40-50% of the state’s renewable energy or enough to power 170,000 average households). This deal to take full control makes the wind farm one of the largest local renewable energy projects directly owned by an Australian super fund.

Infrastructure currently makes up roughly 6% of the Core portfolio and, the ability to do a deal like this, highlights the benefits of being one of Australia’s largest super funds. Our scale means we can easily access a wider range of asset classes, including unlisted assets, not available to smaller funds.

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Rest performance results to 30 June 2019*

Superannuation - Core Strategy option
3 month (%) 1 Year (%) 10 Year (%pa)
3.35 5.96 8.95
Balanced option (REST Pension)*
3 month (%) 1 Year (%) 10 Year (%pa)
3.11 5.72 8.51

Rest super performance results to 30 June 2019*

Rest pension performance results to 30 June 2019*

* Returns are net of investment fees and tax, except Pension which is untaxed. Three month returns are not annualised returns. Returns for the ten year period are annualised returns. Past performance is not an indicator of future performance. For more investment information including the latest investment returns visit rest.com.au/investment.

This material is current as at June 2019 but may be subject to change. This information doesn’t take into account your circumstances. So, before acting on it, you should consider whether it is appropriate for you. Before making a decision about your super, please read the relevant Product Disclosure Statement at rest.com.au/pds or call 1300 300 778. Rest has no relationships that might influence our advice to you. Rest does not pay or receive commissions. This information is provided by the issuer, Retail Employees Superannuation Pty Ltd ABN 39 001 987 739, AFSL 240003 as trustee of Rest (Retail Employees Superannuation Trust ABN 62 653 671 394).

 

This website is provided by Retail Employees Superannuation Pty Limited ABN 39 001 987 739, AFSL 24 0003 (Rest), trustee of Retail Employees Superannuation Trust ABN 62 653 671 394 (Fund), of which Rest Super, Rest Corporate, Rest Pension and Acumen are part. It contains general advice that has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, consider its appropriateness and the relevant Product Disclosure Statement (PDS), which is available on this website. The cost of providing financial services is included in the fees in the Fund as disclosed in the relevant PDS. Rest and the Fund do not charge any additional fees or obtain any commissions for the advice provided. Rest’s employees are paid a salary and do not receive any commissions. They may receive a performance related bonus that takes into account the financial services provided. Super Investment Management Pty Limited (ABN 86 079 706 657, AFSL 240004), a wholly owned subsidiary company of Rest, manages some of the fund’s investments. Apart from this, Rest does not have any relationships or associations with any related body corporate or product issuer that might reasonably be expected to be capable of influencing Rest in providing financial services.

Rest personal advice is provided by Rest Advisers as authorised representatives of Link Advice Pty Ltd ABN 36 105 811 836 AFSL 258145

Awards and ratings are only one factor to consider when deciding how to invest your super. Further information regarding these awards can be found at rest.com.au/about-rest/awards. Past performance is not an indicator of future performance. SuperRatings Pty Limited does not issue, sell, guarantee or underwrite this product. Go to superratings.com.au for details of its ratings criteria. For further information about the methodology used by Chant West, see www.chantwest.com.au