In June, Britain’s decision to leave the European Union, or ‘Brexit,’ also contributed to market volatility and pushed most global share markets lower.
Australian equities ended the financial year with an annualised return of 0.6%. International sharemarkets delivered an annualised return of -1.4% on a fully hedged basis.
On the positive side, Australian listed and global listed property continued their positive trend, benefiting from the chase for yield, delivering annualised returns of 24.6% and 18.7% respectively. Australian and international bond returns also delivered solid positive returns.
Figure 1: End of financial year – investment market performance snapshot1
|Return on asset||1 month (%)||3 month (%)||6 month (%)||2015/16 FY (%)||3 year (%)||5 year (%)||10 year (%)|
|International shares (unhedged)||-3.8||4.4||-1.7||0.4||14.8||14.9||4.4|
|International shares (hedged)||-1.2||-1.7||-0.2||-1.4||10.9||11.3||6.5|
|Australian listed property||3.5||9.3||16.3||24.6||18.5||18.1||3.1|
|Global listed property||4.0||4.8||9.8||18.7||14.3||13.1||-|
|Global listed infrastructure||5.5||9.0||16.0||6.6||13.0||14.8||12.1|
Looking ahead – expect lower for longer
With cash rates and bond yields already so low, share markets are likely to be a key source of return for investors.
However, as global growth and inflation are likely to remain subdued for some time, overall super returns are likely to remain relatively muted. We anticipate that single-digit super returns are likely over the next few years.
Keep your focus on what really matters
With market volatility expected to continue in the near term, investments in well-diversified, actively managed portfolios will help to smooth out returns.
We expect active positions in the Australian dollar will be important going forward, but so too will investment in alternative assets, such as infrastructure, absolute return strategies and private equity, which have a low correlation with mainstream markets, such as shares.
What this means for you and your super
Super is a long-term investment, so don’t be too concerned about short-term ups and downs. It’s important to stick to your long-term super strategy.
If you sell your shares, or change your super investment portfolio when share markets are down, you could potentially make a loss, so you should seek financial advice before you make any changes.
About the author
Debbie Alliston, Head of Multi-Asset Portfolio Management, AMP Capital. Debbie Alliston is the Head of Portfolio Management within the Multi-Asset Group, responsible for overseeing the Group’s multi-asset investment capability which specialises in the management of diversified portfolios. She is also the Portfolio Manager for AMP’s flagship Corporate Super portfolios.
1 Past performance is not a reliable indicator of future performance. Source: Bloomberg, AMP Capital, as at 30 June 2016; Australian shares: S&P ASX 200 Accumulation (AUD); International shares (unhedged): MSCI World ex AU Accumulation (AUD); International shares (hedged): MSCI World ex AU Accumulation Hedged AUD; Australian listed property: S&P ASX 200 A-REIT Accumulation; Global listed property (hedged): FTSE EPRA/NAREIT Developed Rental Hedged AUD; Global listed infrastructure (hedged): Dow Jones Brookfield Global Infrastructure Net Accumulation Index Hedged (AUD); Australian bonds: Bloomberg AusBond Composite 0+ Yr Index; International bonds (hedged): Barclays Global Aggregate Index Hedged AUD; Cash: Bloomberg AusBond Bank Bill Index.
The current trend for investing in low risk assets could put your long-term investment strategy at risk.