Powered by MOMENTUM MEDIA
investor daily logo

Fund warns inflationary pressures, volatility to pose risks to super returns in 2024

  •  
  •  
4 minute read

Rest has warned that inflationary pressures and macroeconomic volatility pose risks to super returns in the year ahead.

The default investment option within Rest’s core strategy has reported a commendable one-year return of 9.58 per cent for the calendar year 2023 in the latest financial news, the fund reported on Thursday. This success can be attributed, in part, to the strong performance of international shares during the closing months of the year, it said.

Also of note, the fund said, were strong performances from Rest’s high growth and sustainable growth options delivering returns of 11.58 per cent and 10.37 per cent, respectively, in calendar year 2023.

Commenting on the results, Rest’s chief investment officer, Andrew Lill, characterised the conclusion of the calendar year as optimistic, while acknowledging the persistent presence of significant inflationary pressures in the global economy. Mr Lill also emphasised the imperative for super funds to adopt a more discerning approach to sustain robust returns for their members.

==
==

“I’m pleased with the strong performance we’ve delivered to our nearly 2 million Rest members during the past 12 months. It’s important to remember that super is a long-term investment, so we continue to focus on a much farther horizon than any single year,” said Mr Lill.

“A number of markets appear to be pricing in cash rate cuts over the next 12 months and the outlook for 2024 is certainly pointing to softer growth. But we believe there’s considerable risk that markets are anticipating a speedy return to the low-inflation, low-cash rate environment we experienced for a decade in the 2010s.”

Mr Lill cautioned that it’s likely we are heading into a period of higher structural inflation, as well as greater macroeconomic volatility, than we’ve experienced in recent times”.

“We are focused on five megatrends impacting society and markets that, on balance, we expect to be inflationary. Investors will need to be very selective in this environment and we are focusing on assets that are well placed to benefit from these megatrends.”

Rest is using the identified megatrends to inform the fund’s scenario modelling for future market expectations. The five megatrends include decarbonisation, deglobalisation, demographics, digitisation, and debt and central bank policy.

“The majority of our members will retire in a world that has been decisively shaped by these megatrends. We believe they are generating attractive long-term investment opportunities in all asset classes across our whole portfolio,” said Mr Lill.

SuperRatings reported on Wednesday that the median balanced option is expected to return 9.6 per cent for 2023.

This is a really pleasing result to observe for 2023, said executive director of SuperRatings, Kirby Rappell.

Returns remained strong into Christmas, with SuperRatings estimating that the median balanced option generated a return of 2.8 per cent over the month.

Fund warns inflationary pressures, volatility to pose risks to super returns in 2024

Rest has warned that inflationary pressures and macroeconomic volatility pose risks to super returns in the year ahead.

ID logo
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.

Comments powered by CComment