This, the fund clarified, was ahead of its 10-year and 20-year average returns, but down on the 9.2 per cent return recorded in the previous fiscal year.
The Overseas Shares – Indexed option achieved an 18.07 per cent return in FY2023–24, outperforming the Balanced – Indexed option, which returned 12.17 per cent. The High Growth option posted a return of 11.1 per cent over the same period.
For Rest’s pension members, the default Balanced investment option delivered a return of 7.56 per cent, also ahead of its 10-year and 20-year average returns.
Commenting on the results, Rest chief investment officer Andrew Lill said that while recent months have aligned with the expectation of persistent core inflation and sustained higher cash rates, the fund observed that companies with strong balance sheets, higher profitability, and strong earnings have achieved gains.
“Our exposure to these higher-quality companies, such as many of the Magnificent 7 tech stocks at the forefront of artificial intelligence development, and our decision to stay fully invested in listed equities has been strongly rewarded,” Lill said.
“These shares have provided a great financial benefit for our members this past financial year.”
According to Lill, the $85 billion fund has, in aggregate, some $4.5 billion invested in the Magnificent 7 through its Core Strategy option.
He added that despite the fact that inflation is trending in the right direction in most developed markets, Rest is bracing for a period of higher structural inflation and greater macroeconomic volatility than experienced in recent times.
“It’s critical we maintain a well-diversified, resilient portfolio and the expertise to identify opportunities in this environment that add long-term value for our 2 million members.
“Our exposure to the Magnificent 7 is an example of where we have identified a valuable opportunity and acted to maximise the benefit,” Lill said, adding that digitalisation has been another megatrend identified by the fund.
“We think more beneficial opportunities will appear thanks to the ongoing digitalisation of the economy and society.”
Looking forward, Rest pointed to a number of other investment trends it believes will continue to shape the future direction of the global economy including decarbonisation, deglobalisation, demographics, and debt and central bank policy.
Rest also revealed that as of 1 July, and in recognition of the relatively young age profile of its members, the fund’s board approved a higher weight to growth assets in the Core Strategy. Namely, some half of Rest’s members are aged under 30, and won’t be retiring for some time.
“Following that strategic setting, we made significant investments in industrial property, such as our joint venture with Barings and our commitment to the Fidelity Real Estate Logistics Impact Climate Solutions (LOGICs) fund, which we believe are well placed to benefit from the deglobalisation of supply chains, the decarbonisation of the economy, and the digitalisation of commerce and retail,” Lill said.
“We also made a $1 billion commitment with Quinbrook Infrastructure Partners, which will provide exposure to a range of assets like green data centres and solar and battery projects. The assets are expected to benefit from digitalisation and decarbonisation.”
