Your super investment update - period to 30 September 2019

posted on 28.10.2019

REI Super continues to outperform our objectives

The REI Super Balanced option has continued to outperform it’s objective of CPI plus 3%, achieving a net return, after fees and taxes, of 5.6% for the 12 months to 30 September. The Growth option achieved a 6.4% return. 

If we look at the longer term, the Balanced option is outperforming the benchmarks, with 7.6% per annum over 6 years, 8.7% per annum over 7 years and 7.7% per annum over 10 years.

All key asset classes delivered positive returns for the quarter. Fixed-income returns were particularly strong and global shares in developed markets also recorded gains. 

Australian shares delivered a solid gain of 2.4% for the quarter. To put that in context, Australian shares have outperformed global share markets by delivering a high return of 22.6% for the 12 months to 30 September.

Global market and outlook

We’ve had an unusually long period of expansion and economies can’t keep growing forever. Global growth has slowed down and it’s been exacerbated by the U.S / China trade wars. 

The bulk of this slowdown is happening in the manufacturing sector, hitting the China, U.S and German economies. Now it’s slowly affecting the services sector. You can't underestimate the impact of the trade war.

The past 3-5 years has been an unusual period. Countries around the world are worried about a global downturn. We can see this with negative interest rates in Europe, the introduction of quantitative easing and unprecedented monetary policy intervention by central banks around the world. 

In the US there has been no recession for two decades which is very unusual. We typically get a recession every decade. There was the GFC but not much has happened since then.

During this period, we have seen equity markets rally hard and deliver positive returns. There have been more upturns than downturns and when there’s been a downturn, it’s been very short. It’s rare to see all asset classes rising at the same time. This is not the norm.

Although the inversion curve in the US bond market has corrected, where the yield on the 10 year bond was less than 2 years, there is still plenty of discussion about a recession.


Protecting our members’ capital 

When you look at how compound interest works, if you get a market correction and a downturn of 20%, you need a 25% market increase to get your capital back. So, losing less is always important and why we believe capital preservation is more important than fully participating in upward cycles, for long term wealth creation.


The power of negative compounding










Image provided by Morningstar

We have positioned your portfolio to manage the risk of loss. The Australian and U.S. markets are quite expensive, so we have underweighted allocations in these markets. We favour other share markets that offer better valuations such as Japan, selected sectors in Europe and emerging markets. We invest in markets that can participate better in a rally and that are less likely to fall.


Note: Future investment performance can vary from past performance, and you should not base your decision to invest in REI Super simply on past performance. Past earning rates are not an indicator of future earning rates. The investment returns of REI Super are not guaranteed, and the value of the investment may rise or fall.