Monthly highlights

  • The Growth (Cbus MySuper) option returned 1.42% for the month of December and 13.01% for the 12 months ending 31 December 2021.
  • Australian and Global shares* delivered a return of 2.65% and 3.67% (hedged) respectively for the month of December2021.
  • The Reserve Bank of Australia left the cash rate unchanged at 0.10% in its meeting on 8 December.  

*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% 0.67% 1.11% 1.42% 1.55%
FYTD  0.10% 1.70% 2.27% 3.82% 4.55%
1 Year 0.17% 4.65% 8.58% 13.01% 16.46%
5 Years p.a. 0.98% 5.19% n/a 9.31% 11.32%
10 Years p.a. 1.64% 6.01% n/a 10.29% 12.16%
Funds managed ($m) 887.80 1,047.37 822.28 56,624.25 4,615.40

*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 0.02% 0.67% 1.12% 1.42% 1.56%
FYTD  0.10% 1.71% 2.76% 3.85% 4.55%
1 Year 0.17% 4.66% 8.59% 12.97% 16.51%
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) 8.21 17.08 148.13 151.09 23.34

*These options commenced on 1 July 2017. 

Fully Retired Option Performance (crediting rate)

 

  Cash Savings Conservative Conservative Growth* Growth High Growth
1 month 0.03% 0.75% 1.25% 1.59% 1.73%
FYTD  0.12% 1.91% 3.12% 4.38% 5.22%
1 Year 0.20% 4.82% 9.52% 14.38% 18.34%
5 Years p.a. 1.22% 5.81% 8.27% 10.36% 12.55%
10 Years p.a. 2.01% 6.79% n/a 11.50% 13.54%
Funds managed ($m) 88.35 594.98 1,896.67 1,327.05 152.02

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

Market overview

December Quarter 2021 Investment Environment Review (accurate as at 25 January 2022)

The December quarter saw relatively flat bond yields and strong share market returns, with the Global Shares index (MSCI ACWI index) rising by 7.0% over the quarter. However, most of these gains were recorded early in the quarter and market volatility picked up through November and December as markets digested the emergence of the Omicron SARS-Cov-2 variant and the likelihood that interest rates may rise faster than previously expected during 2022.

Share markets had dipped during September, initially driven by the Evergrande debt crisis in China, but rebounded strongly during October, as fears of wider contagion from the likely bankruptcy of China’s second-largest property developer faded. By late October the US Shares Index (S&P500) was setting new record highs once again. Markets began to wobble once more in November, firstly due to the discovery of a new variant of Covid-19 in South Africa. Initially, little was known about the variant that would come to be named Omicron, other than that it had a large number of mutations and seemed to have spread very quickly through southern Africa. This led to significant fear that Omicron may render existing vaccines ineffective, potentially requiring a return to extensive lockdowns until new vaccines could be developed.

Fortunately, this worst-case scenario has not come to pass; it became clear relatively quickly that Omicron is extremely contagious but that it usually does not cause disease as severe as previous variants – in part because existing vaccines still offer good protection against severe disease. Omicron’s rapid spread around the world has impacted economic activity, largely due to people exhibiting more caution and/or having to isolate while sick. However, health outcomes have not been as bad as in previous waves. Omicron waves have also subsided relatively quickly in the earliest-hit places, supporting the view that the economic impact will be temporary.

As market concerns over Omicron faded, a second cause for concern quickly emerged, though; an increasing ‘hawkish’ view from major central banks with inflation rising. This was particularly the case for the US Federal Reserve (Fed). The Fed began to slow its monthly ‘QE’ asset purchases in November by USD15bn a month (from an initial pace of USD120bn per month), which would have seen the purchases end in mid-2022. By the next Fed meeting in December, the policy-setting committee had decided to accelerate the so-called tapering to USD30bn per month, which would bring the program to an end in March 2022. Additionally, the committee signalled the likelihood of more rate hikes in 2022 and the Fed Chair, Jerome Powell, struck a much more hawkish tone in his post-meeting press conference, acknowledging that the labour market is “hotter than it ever ran in the last expansion” and that inflation pressures are more likely to prove persistent.

The prospect of tighter monetary policy in 2022 including rising interest rates – which is likely to weigh on the economy and asset valuations to some degree – saw market volatility remain elevated heading into year-end. Bond yields began to edge higher once again and the performance of some of the more speculative segments of the equity market began to falter.

Investment Environment Outlook

The investment environment in 2022 is likely to be dominated by two opposing forces; the continued economic recovery and rising interest rates. The first should support risk assets such as equities, while the second could weigh on them.

While the rate of economic growth appears to have peaked following the sharp upswing immediately following the global re-opening, growth is still likely to remain strong in 2022. Supporting factors will include continued easing of restrictions (e.g. of international borders), renewed focus from fiscal policymakers on stimulative policies such as infrastructure investment, and the very strong position of household and corporate balance sheets across most of the developed world.

Nonetheless, there are downside risks to the outlook. One obvious risk is further waves or mutations of the virus that causes Covid-19, especially if they further reduce the efficacy of existing vaccines. Another is the continued tightening of monetary policy, particularly in the US where markets are now pricing in 100bps of rate hikes in 2022. Policymakers are only seeking to move from expansionary to more neutral interest rate settings, but the risk of a policy mistake (whereby they tighten too aggressively and stall the economy and/or spook markets) cannot be ignored. 

On balance, these challenges should not be a barrier to further share market gains – particularly as global demand growth remains strong – but could result in periods of greater volatility. An environment of higher interest rates and/or inflation may also see some rotation within equity markets. For instance, some sectors (such as technology) that have benefitted the most from low interest rates could be set for a period of underperformance compared to other sectors. 

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 31/12/2021 Growth (Cbus MySuper)
Australian shares 22.97%
Global shares 25.09%
Emerging market shares 6.40%
Private equity 2.33%
Alternative growth 1.88%
Infrastructure 11.45%
Property 11.29%
Global Credit 7.25%
Fixed interest 6.37%
Cash 4.97%
Growth / Defensive allocation split 73.66% / 26.34%

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.