Super returns finish on a positive note



The year ending 31 January 2021 proved to be an exciting year for financial markets with the COVID-19 pandemic ending a decade-long bull market, but reversing almost as quickly as it began.

It was a strong finish to the year on the back of positive vaccine news, President Joe Biden beating Donald Trump in the US elections and continued monetary and fiscal stimulus globally. This led to positive absolute returns for the diversified VISSF options for the year ending 31 January 2021.

Share markets began well in February, thanks in part to improving US-China trade relations and the subsequent signing of their ‘phase one’ trade agreement. However, shares drastically reversed direction towards the end of the month and continued their slide through much of March as it became increasingly likely the rapid spread of COVID-19 outside mainland China would push the global economy into recession.

For the most part, this included the shutdown of all non-essential services and activities, which had the effect of bringing parts of the global economy to a near standstill. Share markets performed favourably through the June quarter, climbing off their March lows on expectations economic activity would pick up amid a loosening of virus containment measures and ongoing government and central bank support globally. Shares extended their gains through the September quarter due to expectations that these measures and support would continue to drive the global recovery.

Share markets finished the year well, driven by encouraging developments on the vaccine front after several leading pharmaceutical companies announced vaccines that proved to be more than 90% effective in combatting COVID-19. This saw investors pile into stocks in the hope those countries hit hardest by the pandemic would soon be able to begin the process of reopening their economies.

Stocks also benefited from easing US political uncertainty after Joe Biden was confirmed as president and congressional leaders finally agreed a new stimulus package. In terms of central bank activity, the Reserve Bank of Australia (RBA) cut interest rates three times during the year; taking the official cash rate from 0.75% to a historically low 0.10%. It also introduced a bond buying program to lower long term borrowing rates and stimulate the post COVID-19 economic recovery.

VISSF continues to meet investment objectives and maximise returns relative to inflation, as measured by the Consumer Price Index (CPI), with our diversified Accumulation options outperforming their CPI relative investment objectives across the five year target horizon and longer time periods to 31 January 2021.

See the table below for investment return details.

Year ended 31 January 2021 One year
3 year compound average (% p.a.) 5 year compound average (% p.a.) 7 year compound average (% p.a.) 10 year compound average (% p.a.)
All Growth 0.4 5.3 9.6 8.3 8.4
Objective (CPI + 3.5%) 4.4 5.0 5.1 5.1 5.4
Outperformance -4.0 0.3 4.6 3.2 3.0
Balanced 0.9 4.9 8.0 7.1 7.5
Objective (CPI + 3.0%) 3.9 4.5 4.6 4.6 4.9
Outperformance -3.0 0.4 3.4 2.5 2.5
Conservative 2.2 4.2 5.4 5.2 5.7
Objective (CPI + 1.5%) 2.4 3.0 3.1 3.1 3.4
Outperformance -0.3 1.2 2.4 2.1 2.3
Cash 0.0 0.6 0.9 1.1 1.7
Objective (Bloomberg AusBond Index)1 -0.1 0.6 0.9 1.1 1.7
Outperformance 0.1 0.0 0.0 0.0 0.0
Inflation CPI 0.9 1.5 1.6 1.6 1.9

1 The Bloomberg Aus Bond Bank Bill Index returns are net of fees.

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