Share markets and thinking for the long term
Following strong returns in 2016 and 2017, global share markets had mixed returns throughout 2018. After a volatile start to the year, markets appeared to recover throughout June to September before sharper falls in the last few months of the year.
As the Growth (Cbus MySuper) option has around half its investments in shares, this has impacted the shorter term returns for this option and other Cbus investment options that have shares.
The share market outlook
The share market falls in late 2018 have been a result of a few factors, including higher interest rates in the US after many years of very low rates, slowing global economic growth, an escalation in the US/China trade tensions and uncertainty about whether the UK will successfully exit the European Union. The global economic outlook for 2019 and 2020 is now less positive, and strong returns from share markets over the short to medium term seem unlikely.
The weaker returns from share markets in 2018 follows a couple of years of strong returns and these are reflected in Cbus’ favourable longer-term results. While the recent period of falling share markets may be a concern for members, it is important to maintain a longer-term focus when considering superannuation. Periods of negative returns will occur from time to time and Cbus’ investment options are designed with this in mind. In particular, they include a range of asset classes to provide more stable returns over the long term than investing in just shares.
Why Cbus invests in property and infrastructure
Cbus has over 20% of the Growth (Cbus MySuper) option invested in unlisted property and infrastructure assets. These assets are expected to provide long term returns comparable with share markets but with less short-term volatility. Their returns tend to be more stable than shares because revenue for these assets typically reflect long-term contracts.