Industry superannuation fund Cbus is on course to deliver a stunning annual return of 19 per cent for the current financial year.
Chief investment officer Kristian Fok said the result was likely to be the best yearly return in the 22 years he had been associated with the fund, and was driven by soaring global sharemarkets supported by record-low interest rates.
Mr Fok said private equity also performed well and Cbus had achieved solid returns in unlisted ex-retail properties, high-quality unlisted infrastructure assets, and direct lending to businesses.
The fund participated in about $700 million worth of underwriting and capital raising activities over the year, helping companies with restricted cash flow during the first lockdown but well positioned to take advantage of the economic recovery as restrictions eased.
“Broadly speaking, those investment firms that had the confidence to invest in the markets, and the capability in terms of the cash flows to be able to do that, are broadly the winners,” Mr Fok said during a media call on Wednesday.
“And those that took a more conservative approach, or were cash-flow constrained, tended to be lagging.”
Mr Fok said Cbus, which now has $65 billion in funds under management, also made direct investments in construction loans that supported the development of 862 new residential units across Sydney and Melbourne.
He said about 35 per cent of the super fund’s overall investments were managed in-house and this meant Cbus could drive down investment fees as it scaled up.
The investment cost of managing a dollar of savings is consequently expected to have fallen by about 8 per cent over the 2020-21 financial year.
“So, again, a really strong outcome,” Mr Fok said.
“And a strong indicator that, certainly, there are significant benefits in terms of being involved with a fund that has both internal investment capabilities but also the ability to scale.”
The estimate of a 19 per cent annual return – which came after a 0.75 per cent return in the previous financial year – is subject to movements in global sharemarkets until June 30 draws to a close.
But the strong result is in line with a global resurgence in financial markets after policymakers around the world responded to the pandemic with trillions of dollars in economic stimulus.
According to research house SuperRatings, the median growth superannuation fund returned a massive 19.8 per cent over the first 11 months of the 2020-21 financial year while the Australian sharemarket soared about 25 per cent.
SuperRatings said the median balanced fund had returned 16 per cent over that timeframe.
Mr Fok said it was unlikely Cbus would be able to repeat the same eye-watering returns next year, as the result was aided by the fact the previous year was flat, and interest rates have already fallen to record lows and cannot go any lower.
“We’re anticipating single-digit returns, [so] lower than our previous long-term forecasts,” he said.
“But still, we do believe our [inflation] plus 3.25 per cent objective is achievable.”
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