Super returns to be lower

The last decade has seen strong returns in the superannuation industry, despite being a low-rate environment, but this is unlikely to continue in the future, according to a panel.

Speaking on a webinar hosted by Frontier, Mark Delaney, AustralianSuper chief investment officer (CIO) and deputy chief executive, said there had been a low-rate environment for 10 years and the returns had been “fantastic”.

“In 10 years, our balanced plan has done 9.7% per annum – like crikey, if that continues forever that’s going to be fantastic,” Delaney said.

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“It won’t. But there’s this assumption that low rates equal low returns and that hasn’t been case; low rates has equalled high returns.

“It’s also pushed up valuations which is a broader indicator of where returns are going to go but I wouldn’t read one into the other; valuations are a better indicator of what you think future returns will be.

“Returns in the future will be lower than the 10% [p.a.] we’ve made for the last 10 years but our job is to make as much money as we can for our members.”

Kristian Fok, Cbus CIO, said it was fair to say if you were long duration/long risk during that period you made money no matter what.

“But at the same time there are big thematical plays… that tailwind is not sustainable,” Fok said.

“I keep saying there’s not going to be ongoing returns that are high – I don’t mind being proven wrong in that way.”

When it came to the expansion and consolidation of the industry, Delaney said “size can creep up on you” and he had not expected the super fund would grow as big as it had.

“I first started managing pension money 20 years ago and we were $3 billion and now we’re managing $250 billion,” Delaney said.

“No one would’ve thought when we were managing $3 billion that we would be managing $20 billion let alone $100 billion. The unimaginable happens far too often in this part of it but we just seem to cope.

“There’s no point in building a portfolio or an approach for where we are today – we need to build one for five years’ time – look ahead five years’ time and think how big will we be.”

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