A focus on accumulation performance

03-Apr-2019

On the back of volatile markets and heightened geopolitical risks, the year ending 31 January 2019 was challenging for investment returns. The All Growth option produced a -1.2% return for members, while the Balanced and Conservative options delivered -0.2% and 1.3% respectively. Despite this, members will be pleased to learn that investment returns for VISSF remain strong over 3 year and longer time periods.

It's important to remember that returns are likely to fluctuate from year to year and focusing on long term results offers a more realistic outlook.

Year in review

Financial markets began 2018 well, with stocks rising in January as investors responded positively to more encouraging US earnings results and further evidence that global economic activity was gathering momentum. However, share markets moved sharply lower in early February impacted by US political uncertainty and the threat of a potential US-China trade war.

Optimism returned to financial markets in both the June and September quarters on the back of encouraging US earnings results, improving US jobs data and stronger commodity prices. Sentiment was further buoyed by positive European and Japanese earnings and an upward revision to already-strong June quarter US growth figures. However, investors were made to exercise some caution as US-China trade frictions escalated and concerns over Brexit negotiations mounted.

Share markets ended the 2018 calendar year on a sour note, with stocks falling sharply due to a series of softer-than-expected European economic data and ongoing US-China trade uncertainty. Markets were also impacted by increasing fears over Brexit, the Federal Reserve's decision to raise interest rates yet again in December, and further evidence that growth in China is slowing; the latter suggesting the country’s standoff with the US is beginning to bite. However, almost half of the falls experienced in the December quarter were recovered in January 2019 as sentiment improved, with the US Federal Reserve adopting a 'wait and see' approach to future rate hikes.

The share market falls in the December 2018 quarter meant the VISSF options did not beat their inflation relative investment objectives, as measured by the Consumer Price Index (CPI), for the year ending 31 January 2019. However, VISSF continues to meet its medium to long term investment objectives and maximise returns relative to inflation, with all our diversified options outperforming their CPI relative investment objectives over 3-year periods and longer.

See the table below for investment return details.

Year ended 
31 January 2019
One year (%)
3 year compound average
(%pa) 
5 year compound average
(%pa)   
7 year compound average
(%pa)  
10 year compound average
(%pa) 
All Growth  -1.2
 10.2  8.1  10.5  10.5
Objective (CPI + 3.5%)  
     5.4  
Outperformance  
 
 5.1  
         
 Balanced   -0.2
 8.3  7.0  8.9   9.2
 Objective (CPI + 3.0%)  
   4.7    5.1
 Outperformance  
   2.3    4.0
           
 Conservative   1.3
 5.2  4.9  6.1  6.5
 Objective (CPI + 1.5%)
 3.2      
 Outperformance
 2.0      
           
 Cash   1.2
 1.2  1.4  1.7  2.2
 Objective (Bloomberg AusBond Index1)  
 1.3  1.5  1.7  2.2
 Outperformance  
 -0.1  -0.1  0.0  0.0
           
 Inflation CPI   1.8  1.7  1.7  1.9  2.1

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


Chant West Super 2018 Pension 2018

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