Your 2023-24 wrap up

Hi, everyone. I'm Jackie Clark, the Education Director here at Colonial First State. And today I'm joined by Jonathan Armitage, our Chief Investment Officer. And as the title suggests, Chief Investment Officer means you're responsible for managing all of our members’ superannuation and investments.

 

Thanks for joining us today, Jonathan.

 

Thank you, Jackie. Delighted to be here and really delighted to be able to talk about some great returns we've produced for our members over the last 12 months.

 

And as a member, I'm also excited to hear a little bit more about that as well. And great context to get us started into our brief update today We are going to be covering what's happened over the last 12 months because you've recently received your superannuation statements, and we're going to unpack a little bit of what that information is contained in the statements.

 

Also have a look at where markets are heading, perhaps over the next 12 months. But before we do that, Jonathan, I'm really keen to sort of understand you've now been with us here at CFS for a couple of years, made some significant changes, which I'd just like to elaborate a little bit further on that.

 

Yes. So I think, joining CFS, the primary focus of someone coming in, to this type of role is making sure that you're producing great outcomes for our members.

 

And that's been very much at the forefront of the things that I've been focused on. We've made some changes to the structure of our investment team, making sure that we've got the right individuals in the right roles to help deliver some great outcomes for our clients and also bringing in some expertise, particularly around providing a wider range of investments that sit within our superannuation fund.

 

And I'm delighted that we're starting to see some of those changes really bear fruit in terms of the returns that we've produced for our members over not just the last 12 months, but the last couple of years.

 

I think we're all excited to hear a little bit more about that. But before we do, let's rewind to the last financial year. How have markets performed?

 

Well overall, you've seen some really strong, investment performance, particularly from equity markets.

 

If we sort of step back, it's actually been, quite an extraordinary period. We've seen some volatility in markets, due to geopolitical events. We've still got two conflicts, in Eastern Europe and also the Middle East and it's also been it against a backdrop of continued, sort of, more elevated interest rates.

 

Having said that, you continue to see some really strong returns out of equities in particular.

 

If you look in the US, and also Japan, that's been an interesting market, which has probably been, a little bit of a surprise to a lot of investors, some very strong returns there. But in the US, it's really been technology companies, those focused on artificial intelligence, which have really driven investment returns. So companies like Nvidia, which is a semiconductor company right at the center of what's going on with AI, Microsoft, that's a name that will be familiar to lots of people, listening in.

 

And also Tesla, the car manufacturer, all seeing very strong returns.

 

To put a bit of context around this, and to sort of point out how extraordinary some of the individual company returns have been, to focus just on Nvidia as one particular name where you've seen some quite extraordinary returns. The stock was up over 200% in the last financial year. But this is not a small company.

 

In the last 12 months, it's actually put on revenue, which is greater than the entire revenue of BHP.

 

And it just shows you the growth characteristics you are seeing from these type of companies. So it's been an extraordinary period from an investment perspective. But it's also been fascinating to watch and be part of.

 

And you're going to tell me that we definitely have Nvidia in our portfolios here at CFS.

 

Yes we do. We had we had a very good exposure to Nvidia.

 

In addition to that, we've also seen good returns from Australian stocks, so closer to home. The Australian stock market was up nearly 12% during the last 12 months, which in of itself was a very strong return. And what's been interesting is some very strong returns from banks, in particular, and also companies like Goodman Group, which has sort of benefited from some of the technology developments, particularly around data centers and logistics.

 

How does that translate to our superannuation returns?

 

Well, I'm really pleased to be able to sort of talk about some of the returns we've generated for our super fund members. If I take a couple of our sort of key investment options, the Lifestage Balanced option, delivered over 12%, 12.1% in the last financial year.

 

And, our Growth Lifestage option delivered 14.3%, which by any standard, are very strong returns.

 

So, very strong returns.

 

In fact, I think they were number one and number two over the last 12 months.

 

Yeah. That's right. Jackie, if you look at SuperRatings, which is an independent company which measures our investment performance, you'll see that in the categories that both the Balanced and the Growth funds come into, they were the top performers in those particular categories.

 

So, a great outcome for members who were involved in those investment options.

 

In fact, I think all of our portfolios did very well. And a lot of that information will be in the statements that we've all just received as well. So we've talked about markets. We've talked about how that's impacted our performance. What are we doing that's different?

 

How do we get to be number one and number two, when there's certainly a lot of choice out there in the market.

 

So I think there are a couple of things. The first one is making sure that we're very disciplined, and focused in the way we go about setting up our investment options. That's something that I've been very focused on in the last couple of years, making sure that we've got a very rigorous investment process in place.

 

I think one of the other things is that we've had less exposure to legacy unlisted assets than some of our competitors.

 

I might just stop you there for a moment and get you to explain. What do we mean by legacy unlisted assets?

 

So unlisted assets are those that you don't see listed on a stock exchange, and so don't price on a daily basis.

 

So the type of assets we're talking about are sort of office buildings, superstores, toll roads and airports. So those types of assets. Okay.

 

That's what's making a difference in our portfolio?

 

So one of the things that we've seen in the last couple of years is that some of those legacies are older, unlisted assets have been impacted by a couple of things.

 

The first thing is that interest rates have risen a lot over the last couple of years, something that all our members will be absolutely well aware of. The second thing is that, as we're all aware, that office working habits in particular have changed a lot over the last 3 or 4 years. And so some of those older office buildings are no longer able to operate, and provide the sort of services that modern tenants expect.

 

And so that means that those sort of valuations are probably less worth than they were 2 to 3 years ago. And that's impacting quite a lot ofour competitors’ returns in that area. Okay.

 

So very competitive, we've got those great returns, which is fantastic news. What about the next 12 months?  What are you seeing in investment markets at the moment?

 

What are the trends going forward?

 

So one of the things that we do think will continue to be an area that investors will continue to focus on, is, first of all, interest rates continuing to be more elevated than we've seen for quite some time. We do expect that inflation data will continue to move up and down. And that's something that investors will have to get used to, for a number of different reasons where we sort of see some of the sort of longer term impacts of aging populations,the impact of moving to renewable energy sources or energy transition. And, the fact that sort of governments are sort of spending more in particular areas, particularly in defence, and that's sort of certainly true in the US and Europe.

 

And we think that those will be sort of more inflationary, over the next couple of years than we've seen historically.

 

So no mortgage relief probably at this stage. And inflation's still going to factor a lot into our day to day spending is what I'm hearing.

 

So I think we think that inflation data will just sort of move up and down.

 

That will impact interest rates over the next sort of 12 months or so. Having said that, there are still some very exciting growth opportunities,

 

in areas like technology, healthcare We think our funds are well positioned to benefit from those. And we're also starting to see some interesting investment opportunities come up in those unlisted assets that I talked about, particularly in infrastructure.

 

And I think that's what's really key for our members as well, that we have a team of experts who are looking at these on a day to day basis. And I certainly know with my own superannuation, I've obviously clearly doesn't have that level of expertise, but it is around being invested in terms of looking at my super how it's growing, is it going to achieve the retirement outcomes, the financial freedom that I'm looking for in the future and then seeking help if I need it?

 

So we do have a guidance center, and I will say that's a bit of a difference from a contact center. These people are trained to help you with any queries to make sure that you're superis perhaps invested in the right portfolio, or there are other things that we can do to get it on track to get that retirement outcome you're looking for.

 

I think that's so important. It's being focused on how your investments  are working, being engaged in those outcomes, and also sort of benefiting from the expertise that CFS can deliver, not just on the investment side, but as you talked about in terms of helping people navigate their superannuation.

 

So first thing is check those statements that you will have just received, have a look in the where my funds are invested column or section within the statements.

 

And that's your starting point. Speak to our contact center, our guidance team, and we can help you navigate what retirement or getting to that retirement you're looking for. Jonathan Armitage, thank you for joining us today.

 

We look forward to hearing more updates and how the markets are progressing over the coming months.

 

My pleasure. Thank you very much indeed for having me.