“Our Investments team constantly assesses the outlook for markets to ensure we continue delivering on our stated return and risk objectives.
“In this environment, we’ve maintained our exposure to growth-oriented investments, given the opportunities we see to achieve attractive long-term returns. We’re continuing to prefer global over Australian equities given their superior outlook for earnings growth, as well as maintaining a healthy overweighting to emerging market equities.
“We’re confident in this approach – it’s generating good outcomes, such as the recent sale of Equis Energy which brought us a $120m windfall gain for members.”
The Aggressive option has been really a strong performer over the past 12 months, and indeed returns over the past five years have been great.
But our investment objective for the Aggressive option is to exceed CPI by at least 5% p.a. over 10 years. It has delivered 4.8% p.a. over the last 10 years, which is under our objective. This result reflects the severe negative impact of the global financial crisis (GFC) on financial markets. The GFC’s lowest point was March 2009, so the Aggressive option’s 10-year returns will be impacted until March 2019.
The other options which have 1, 3, 5 or 7 year time horizons have come out the other side of the GFC.
Cash rates continue to be flat because the Reserve Bank of Australia’s focus has been on balancing easier monetary policy (ie lower interest rates) to stimulate economic growth, while conscious of the level of household debt in the Australian economy.
We haven’t had an interest rate hike in Australia for a few years. But in the US, cash rates rose by three quarters of a percent to 1.5%, and are expected to continue to rise this year.