How did Australia’s largest super funds perform in FY22–23?

AustralianSuper and Australian Retirement Trust (ART) have posted their financial results for the 2022–23 financial year. 

ART, which has 2.2 million members and over $240 billion in assets under management, saw returns of 10 per cent in its Super Savings Balanced portfolio. 

Head of investment strategy, Andrew Fisher, said the financial results have exceeded the fund’s expectations and are up from returns of 9 per cent in the previous financial year, despite the challenging environment.

“The result has exceeded our expectations at the start of the year, in the context of challenging conditions, it is an excellent result. We didn’t make much change during the year, there’s always positive incremental change and new investments and we always have a lot of cash inflows coming in that we can use to reposition the fund and adapt to what’s happening in markets,” Fisher said.

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Over at AustralianSuper, Australia’s largest fund with $300 billion in assets under management, the fund saw a slightly smaller return than ART with the Balanced option of the fund returning 8.2 per cent. 

Over 90 per cent of AustralianSuper’s 3.1 million members are invested in this option.

However, the performance was a notable uptick from FY21–22 performance when the fund experienced losses of 2.7 per cent, only the fourth time in 36 years that the Balanced option had experienced a negative return.  

Mark Delaney, chief investment officer at AustralianSuper, said: “The rebound in investment performance this financial year is an important reminder to look past short-term investment returns and focus on consistent long-term performance.

“The recovery in returns has been driven by strong growth in equity markets globally, with the performance of the technology sector a key driver.

“Overall, investment market returns have been better than we expected and economic growth has proved relatively resilient with consumer spending holding up well over the year.”

Both Fisher and Delaney noted property holdings has had an impact on the fund during the year with the two funds having to write down property assets. 

The office sector, in particular, experienced material downward adjustments due to capital market disruption, the move to staff working from home, and occupancy declines.

Fisher said: “It’s been challenging for office properties thanks to higher interest rates, higher inflation plus the obvious structural drivers in terms of working from home. The last six months we have seen that have implications in terms of transactions and rental vacancies are creeping up which has combined to see valuations come back a bit.”

“Over the year, we have also responded to a variety of significant investment challenges, including write-downs in some property assets to account for falling values,” Delaney commented.

Earlier this year, Delaney stated unlisted property assets, which are managed internally, have been detrimental to the fund’s performance.

“We had a strategy of overweight on retail and a strategy of more international property than Australian. Both of them were the wrong decision and with property, it’s very hard to get out of. Retail got disintermediated by online shopping and we were overweight there then we had a short exposure to industrial so that was the worst of all worlds,” Delaney said.