Monthly highlights

  • The Growth (Cbus MySuper) option returned 1.50% for the month of August and 18.28% for the 12 months ending 31 August 2021.
  • Australian and Global shares* delivered a return of 2.61% and 2.63% (hedged) respectively for the month of August 2021.
  • The Reserve Bank of Australia left the cash rate unchanged at 0.10% in its meeting on 3 August. 

*ASX 300 Accumulation Index and MSCI ACWI ex Aust Net Divs Custom Tax Hedged to AUD.

Super Investment Option Performance (crediting rate)

 

  Cash Savings Conservative Conservative Growth* Growth (Cbus MySuper) High Growth
1 month 0.02% 0.58% 1.02% 1.50% 2.01%
FYTD  0.04% 1.45% 1.86% 2.43% 3.25%
1 Year 0.15% 6.96% 12.17% 18.28% 23.97%
5 Years p.a. 1.07% 5.35% n/a 9.71% 11.93%
10 Years p.a. 1.77% 6.12% n/a 10.13% 11.86%
Funds managed ($m) 883.98 1,051.06 777.63 55,788.42 4,416.85

*The Conservative Growth accumulation option commenced on 6 July 2017.

Transition to Retirement Option Performance (crediting rate)

 

  Cash Savings* Conservative* Conservative Growth* Growth*
High Growth*
1 month 0.01% 0.57% 1.02% 1.49% 2.01%
FYTD  0.04% 1.45% 1.86% 2.42% 3.25%
1 Year 0.15% 6.97% 12.19% 18.04% 24.04%
5 Years p.a. n/a n/a n/a n/a n/a
10 Years p.a. n/a n/a n/a n/a n/a
Funds managed ($m) 8.63 18.04 160.02 154.63 25.08

*These options commenced on 1 July 2017. 

Fully Retired Option Performance (crediting rate)

 

  Cash Savings Conservative Conservative Growth* Growth High Growth
1 month 0.02% 0.64% 1.18% 1.68% 2.34%
FYTD  0.04% 1.64% 2.11% 2.73% 3.69%
1 Year 0.17% 7.45% 13.65% 19.98% 26.63%
5 Years p.a. 1.34% 6.01% 8.59% 10.82% 13.22%
10 Years p.a. 2.16% 6.92% n/a 11.33% 13.24%
Funds managed ($m) 82.14 598.49 1,827.26 1,257.28 149.25

**The Conservative Growth Income Stream option commenced on 1 December 2013.

Market overview

Share markets around the world have undergone a modest correction over the past month (to late September), with a few exceptions including Japan. A number of factors have weighed on market sentiment. The first is the ongoing Delta virus wave, which is seeing growth expectations for the second half of 2021 being lowered. Most developed economies, where vaccination rates are high, have avoided lockdowns or other significant restrictions, but the greater presence of the virus has nonetheless seen consumers moderate their behaviour. The overall pace of growth generally remains strong but has fallen. 

In Australia, lockdowns have had a significant impact on the economy; nationally, hours worked fell by 3.7% month-on-month in August and there was a net loss of 146,000 jobs. However, the pace of vaccination has accelerated and most states will reach 70% vaccination rates in October or November, allowing a progressive reopening of the economy to begin.

The second factor weighing on markets has been the anticipation of reduced central bank stimulus. The Bank of Canada and the Reserve Bank of New Zealand already reduced the pace of (or, in the case of the latter, stopped altogether) their asset purchases* earlier in the year. The Reserve Bank of Australia has also now slowed its asset purchases from AUD5bn a week to AUD4bn, although it has committed to maintaining that pace until at least February 2022. During September, the European Central Bank also announced its purchases under the Pandemic Emergency Purchase Programme would continue at a “moderately lower pace”. The US Federal Reserve is also edging towards a slowdown in its purchases, expected to be announced in November.

Most of these central banks are likely still at least 12-24 months away from actually raising their policy rates from the current near-zero levels. But the first steps to reduce the degree of stimulus are a test of resilience for both the economy and markets. Bond yields have started to shift higher in anticipation of reduced central bank buying. Inflation readings also remain high in many countries, and while this is still largely due to temporary factors, it is likely weighing on bond markets (resulting in lower bond prices and higher yields).

 

The third factor impacting markets has been the loss of momentum in the Chinese economy, and growing fears of financial instability surrounding the property sector. This has culminated in the possible default of highly-indebted property developer Evergrande (the second largest property developer in China). While risks of financial contagion cannot be ignored, the consensus is that the default and possible restructuring of the company and its debts will be controlled by the government, averting a short-term crisis (the government could bail out the company if it really wanted to but is instead seemingly sending a signal to credit markets in an effort to curtail speculative behaviour). We believe the event will weigh further on domestic confidence and Chinese authorities will provide additional stimulus over coming months in an effort to avert a more prolonged slowdown.  From a longer-term perspective, this highlights a key vulnerability within China’s economy of an excessive reliance on the property sector, both as a driver of growth and a store of wealth amongst households.

* Asset purchases, combined with interest rates, encourage spending and investment. The goal is to make sure there is enough demand from households and businesses to match what the economy can produce and when spending is high enough, the economy will operate close to its capacity, leading to full employment and inflation near target. When Governments buys bonds, this raises the price of other bonds in the market and lowers their return, or yield. Lower yields make it cheaper to access credit; this is called quantitative easing, or QE for short. QE can encourage spending and investment by households and businesses in a few ways. For example, if our purchases lowered the yield on five-year government bonds, this would be reflected in lower interest rates on five-year fixed-rate mortgages. QE stimulates the economy in other ways, too. It can make banks more likely to offer loans to households and businesses. That’s because our purchases leave banks with more liquidity, so they can lend to a wider set of borrowers.

Asset allocation

The Strategic Asset Allocations for all investment options can be found on the following pages:

The Actual Allocation for the Growth (Cbus MySuper) option is shown below.

 

Actual allocation 31/08/2021 Growth (Cbus MySuper)
Australian shares 22.41%
Global shares 27.51%
Emerging market shares 6.67%
Private equity 2.48%
Alternative growth 1.91%
Infrastructure 10.99%
Property 9.97%
Global Credit 0.07%
Fixed interest 5.77%
Cash 5.57%
Growth / Defensive allocation split 74.76% / 25.24%

Note: Growth assets include Australian Shares, International Shares, Private Equity, Alternative Growth, 50% of Infrastructure, 50% of Property and 50% of Mid-Risk Alternatives. Defensive assets include Cash, Fixed Interest, 50% of Infrastructure, 50% of Property and 50% of Mid-Risk Alternatives.

Figures are subject to rounding. Actual asset allocation is current as at 31 July 2020. Asset classes are the building blocks of our investment options. We allocate different proportions to each asset class with the aim of meeting each option’s investment risk and return objective. By investing across a range of asset types, the risk of loss is reduced through diversification. 

For more information see asset classes.

We periodically review our investment strategy and believe that the Growth (Cbus MySuper) option is well positioned for growth over the medium to long term, while maintaining some defensive exposure. Cbus’ investment options, with the exception of the Cash Savings option, are broadly diversified across asset classes.

 

Glossary

Investment type Market index

Australian shares

S&P ASX 300 Accumulation Index

Global shares – currency hedged

MSCI All Countries World Ex-Australia Index (Hedged, $A)

Global shares – currency unhedged

MSCI All Countries World Ex-Australia ($A)

Emerging markets – currency unhedged

MSCI Emerging Markets ($A)

Australian unlisted property

MSCI/IPD Australian Property Pooled Index

Australian bonds

Bloomberg AusBond Composite Bond Index

Global bonds

Citi World Government Bond Index (Hedged, $A)

Australian cash

Bloomberg AusBond Bank Bill Index

Disclosure

Past performance is not a reliable indicator of future performance. All Cbus performance and return figures disclosed in this investment update are based on the crediting rate, which is the return minus investment fees, the taxes, and until 31 January 2020, the percentage-based administration fee. Excludes fees and costs that are deducted directly from members’ accounts.

The information is about Cbus. It doesn’t take into account your specific needs, so you should look to your own financial position, objectives and requirements before making any financial decisions. Read the Cbus Product Disclosure Statement to decide whether Cbus is right for you, or call 1300 361 784 for a copy.