Cbus delivers a positive return despite a year of challenges

 

The start of 2020 brought with it a number of significant economic and geopolitical events. Australia was in the midst of one the worst bushfire seasons on record, the pro-democracy movement in Hong Kong had just passed its eight consecutive month of demonstrations, and trade negotiations between the US and China was yet to deliver an agreement on the first phase of a broader trade agreement.

Despite these challenges, share markets started the year off strongly with Australian shares1 providing returns of 7.33% between 31 December 2019 and its pre-COVID high on 20 February 2020. As Governments began responding to the increased spread of COVID-19 by restricting both trade and travel, share markets reacted swiftly. The Australian share market fell by approximately 10% within the space of a single week. The trend of big daily ups and downs continued for almost a month and saw Australian shares fall by more than 35%.

A large part of this recent share market fall can be attributed to widespread uncertainty around what the broader economic impact of COVID-19 restrictions would be. When Governments across the world demonstrated their willingness to support their economies with significant financial stimulus packages, such as JobKeeper in Australia, it helped to drive a speedy recovery in share markets. Australian shares climbed by over 30% between their March low and 30 June 2020 to end the year with 12-month return of -7.61%.

 

The rapid nature of this rebound shows that switching out of an investment option based on short term market movements can be costly as you may miss out on the recovery in share prices which can happen quickly. The graph shown here illustrates the potential longer-term impact of a member switching out of the Growth (Cbus MySuper) option into a more defensive option during the height of the GFC through the most recent fall and rebound^.

 

Even with a negative 12-month return for Australian shares, the Growth (Cbus MySuper) option succeeded in delivering its 11th consecutive year of positive returns with a return of 0.75%2 for the year ending 30 June 2020. This positive return builds on Cbus’ already strong longer-term returns with the Growth (Cbus MySuper) option maintaining its top quartile3 10-year annualised return of 8.54% and delivering annualised returns since inception in 1984 of 8.98%.

 

The positive 12-month return for the Growth (Cbus MySuper) option during a period of negative returns for Australian shares highlights the benefit and importance of diversification in Cbus’ diversified investment options. This is because Cbus’ diversified options have seen positive returns from investments outside of share markets like fixed interest investments, which are more likely to perform well when interest rates and share markets are falling. In addition, Cbus’ significant investments in other asset classes such as infrastructure and property have both delivered positive returns over the 12 months to 30 June 2020, making them some of the main drivers for Cbus’ strong performance.

We have more information available on our website about the impact of COVID-19 including short videos that we encourage you to watch.

If you have any questions about your Cbus account, please call Cbus Advice Services on 1300 361 784 and we will assist you at no additional cost. Please note that we are currently experiencing an increased volume of calls.

[1] S&P/ASX 300 Accumulation index

[2] Investment performance is based on the crediting rate, which is the return minus investment fees, taxes and until 31 January 2020, the percentage-based administration fee. Excludes fees and costs that are deducted directly from members' accounts. Past performance isn't a reliable indicator of future performance. 

[3] Based on the SR 50 Balanced Survey (June 2020, reported on 21 July 2020) which includes investment options that are broadly similar to the Growth (Cbus MySuper) option, as these funds are all diversified with an allocation to growth assets of between 60% and 76%.

This information is about Cbus. You should read the relevant Cbus Product Disclosure Statement to decide if Cbus is right for you. Call 1300 361 784 or visit cbussuper.com.au for a copy. Past performance is not a reliable indicator of future performance.