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Rest Investment Update

September 2021 quarterly review

Rest’s Core Strategy option has ended September up +1.77% for the quarter, and +16.37% for the year, ending 30 September 2021. For Pension members, the default Balanced option posted gains of +1.58% for the quarter, and +14.17% for the year, ending 30 September 2021.

Despite a generally tough September for share markets across the globe, our equity investments remained a key driver of the Core’s positive returns for the year and quarter. Our unlisted assets within the property, agriculture and infrastructure space were also notable contributors. Inflation worries were however a drag on our bond holdings, while ultra-low interest rates continued to weigh on our cash investments. 

Core Strategy option to 30 September 2021

3 months (%) 1 year (%) 10 year (% pa)
1.77 16.37 9.23

Balanced option (Rest Pension) to 30 September 2021

3 months (%) 1 year (%) 10 year (% pa)
1.58 14.17 8.48

All figures as at 30 September 2021. Returns are net of investment fees and tax, except Pension which is untaxed. The earnings applied to members’ accounts may differ. Investment returns are at the investment option level and are reflected in the unit prices for those options. Returns for the ten year period are annualised returns. N/A applies to options running less than the indicated time periods. Past performance is not an indicator of future performance.

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Performance over the long term

Over the long term, the Core Strategy has continued to perform well above its investment objective of CPI + 3% per year over the long-term (rolling 10 year periods). 

Long term performance of Core Strategy as at 30 September 2021

Return (% pa)
10 years

9.23
15 years 7.04
20 years 7.75
Since inception in 1988 8.58

Returns are net of investment fees and tax. Returns for the 10, 15, 20 years and since inception are annualised returns. Past performance is not an indication of future performance. 

Stock Market

September lives up to its reputation

September historically hasn't been a good month for stock markets and this year has proven no different. Having been dormant for most of the past six months, volatility made a marked comeback in September amid fears spiking oil, gas and commodity prices, could fuel inflation and lead to interest rates being raised a lot sooner than expected. Investors sentiment was hampered also by concerns the global spread of COVID-19’s delta variant could derail the economic recovery, and worries the potential collapse of debt-laden Chinese property giant, Evergrande Group, could spark another global financial meltdown.

Market share

Climbing the wall of worry

Weighed by US markets, global shares as measured by the MSCI World ex Australia index (in local dollars) slipped 3.7% in September. In the US, the S&P500 index dropped 4.7% - just its second monthly loss of 2021 and its worst month since March 2020. Notwithstanding this, global shares still managed to close +0.6% higher for the quarter, and an impressive +29.0% for the year ending 30 September 2021, while US markets hit yet another all-time high during the quarter. Global corporate earnings continue to be a bright spot, and investors remain encouraged by still supportive government fiscal and monetary stimulus, easing business restrictions, and the resumption of consumer spending with widespread vaccination rollouts ramping up across the globe. 

ASX

Australia: recovery delayed, not derailed

In Australia, the ASX 300 index climbed +1.8% over the quarter, and +30.9% over the year ending 30 September 2021. Buoyed by a late-quarter rally in oil prices, Energy was the quarter’s best performing sector. However, due to sharply lower iron ore prices on China growth concerns, the Materials sector was the weakest. On the economic front, Australia’s domestic activity was largely upended by enduring COVID-19 lockdowns in NSW and Victoria. News on the Australian jobs front underwhelmed, retail sales disappointed, and forecasts for Australian economic growth have been revised lower as a result of the extended lockdown. Still, this does not appear to have dampened sentiment towards housing, where prices have risen some 20% over the past 12 months and looks to remain well supported by historically low interest rates. The Reserve Bank of Australia (RBA) left monetary policy largely unchanged and cash rates at 0.1% while indicating again, it did not expect to raise interest rates until 2024 at the earliest. 

Retail worker

Looking ahead

We remain broadly positive on the outlook for global growth. With accelerating vaccination rates around the world, there are encouraging signs life could be moving slowly back towards a new post-COVID normal. Solid prospects for global growth bode well for corporate profitability and are supportive of growth assets like shares. But, given the market’s already strong returns over the past 18 months, an increase in market volatility should be expected in the near term.

The biggest wildcard remains - inflation. Newly opened economies are experiencing supply bottlenecks - giving rise to pricing pressures and some of the highest inflation rates seen for many years. If sustained, the fear here is that it could lead Central Banks to pivot towards a less aggressive policy stimulus, and/or higher interest rates, sooner. In China, weak spots are starting to emerge in its growth momentum that could have significant knock-on effects for the Australian economy, should their demand for our raw materials and commodities also decline.

At Rest, we encourage members to focus on long-term returns rather than short-term volatility. Instead of trying to time the markets, maintain realistic expectations for returns and stay the course. Super is a long-term investment to grow your retirement savings, and a long-term investment horizon can help to smooth the impact of the regular ups and downs of markets. This can be seen in our track record of continued competitive returns over 10-year and longer periods for the Core Strategy.