Investment update - March 2019 quarter

Key highlights

  • Share markets performed well over the three months to 31 March 2019 - delivering returns of over 10%
  • Defensive investments, such as Cash and Bonds, achieved positive returns but lower than those of share markets - Cash returned 0.52% and Bonds around 3%
  • Major central banks (such as the Reserve Bank of Australia [RBA]) kept interest rates unchanged with growing expectations that interest rates will be reduced across many countries, including Australia
  • My GESB Super returned 6.21% for the quarter
  • My West State Super returned 6.88% for the quarter
  • RI Allocated Pension Conservative plan returned 4.01% for the quarter

Investment market returns: short and medium term

The performance of major asset classes was generally strong over the three months to 31 March 2019, the past year and the past three years, as shown below.

The bar chart shows the asset class index returns over the three months to 31 March 2019, one year and three years. Australian Shares have returned 10.92% over the three months, 11.74% over one year and 11.39% over three years. International Shares have returned 12.28% over three months, 5.61% over one year and 11.18% over three years. Global listed property has returned 15.02% over three months, 17.28% over one year and 7.14% over three years. Australian Bonds have returned 3.43% over three months, 7.20% over one year and 4.17% over three years. Global Bonds have returned 2.79% over three months, 4.58% over one year and 3.21% over three years. Cash has returned 0.52% over three months, 2.02% over one year and 1.90% over three years.

What were the main reasons for recent investment market returns?

  • Positive steps towards resolving the US-China trade standoff
    Over the quarter, investors grew optimistic that a resolution to the US-China trade standoff was drawing near. In particular, the news that the US suspended the burden of increased tariffs on $200 billion of Chinese goods was reassuring.
  • Share markets recovered from the previous quarter
    After negative returns from shares in the fourth quarter of 2018, many share markets globally reported positive double-digit returns. The response of major central banks to the market weakness in the previous quarter was encouraging. Share markets were also supported by better than expected US job and consumer confidence data.
    Australian shares also reported positive returns during the quarter. Contributing to the gains were resource stocks, which finished higher over the quarter as commodity prices rose.
  • The United States Federal Reserve ruled out rate rises in 2019
    In the US, the Federal Reserve kept the federal funds rates unchanged and ruled out any rate hikes for 2019. At the same meeting, expectations for economic growth were lowered from 2.3% to 2.1% for 2019. The Federal Reserve also announced that it would stop reducing its asset holdings by September, which is sooner than expected.
    There was also a notable shift in interest rate expectations in Australia during the quarter. The prospect of an RBA rate rise is now low and markets are pricing two rate cuts in the next 12 months, the first as early as August 2019.
  • The European Central Bank held interest rates
    The ECB left interest rates at a record low and expects no change until 2020. The bank also cut its growth forecast for 2019 from 1.7% to 1.1% citing 'uncertainties related to geo-political factors, trade protectionism and vulnerabilities in emerging markets'.
    In the UK, the Brexit situation remains uncertain with the European Union providing an extension to 31 October 2019 to accept the withdrawal agreement. Unemployment in the UK fell to a multi-decade low of 3.9% coupled with real wages rising 1.5% over the year.

Investment market returns: long term

Over the longer term (10 years), Shares and Property have produced the highest returns (but with greater variability), while Cash and Bonds have produced lower (but more stable) returns. This is illustrated in the chart below.

This line graph shows how asset class index returns have moved over ten years from March 2009 to March 2019. While the returns go up and down with market movements, over the ten years, Global Listed Property has performed best with a 16% return per annum. This is followed by International Shares with an 11% return per annum, Australian Shares with 10% per annum, Global Bonds with 7% per annum, Australian Bonds with 6% per annum, and Cash with a 3% return per annum.

What does this mean for your investment?

The strong investment returns over both the short and long term has helped our returns over the past 10 years. The table below sets out the performance of some of our investment plans. You can also see the investment return history for all of our available plans.

Performance of investment options

Asset class index returns
March 2019 quarter 1 year 3 years 5 years 10 years
RI Allocated Pension Conservative plan1 4.01% 5.29% 5.04% 4.93% 6.70%
Transition to Retirement Balanced plan2 5.89% 6.41% - - -
My GESB Super1 6.21% 6.68% 7.44% 6.80% 9.01%
RI Term Allocated Pension Balanced plan1  6.86% 6.83% 7.33% 6.54% 8.98%
My West State Super3 6.88% 7.12% 7.90% 7.10% 9.48%
RI Allocated Pension Balanced plan1  6.90% 7.17% 7.76% 6.99% 9.38%
West State Super Growth plan3 7.54% 7.44% 8.62% 7.69% 10.19%

Returns greater than one year are annualised.

1 Returns are reported net of fees and taxes.
2 Transition to Retirement Pension was incepted on 15 June 2017, so longer term returns are not available. Returns are reported net of fees and taxes.
3 Returns are reported net of fees.

Performance information should be used as a guide only, is of a general nature, and does not constitute legal, taxation, or personal financial advice. The performance of your investment plan is not guaranteed and returns may move up or down depending on market conditions. Past performance should not be relied on as an indication of future performance. In providing this information, we have not taken into account your objectives, financial situation or needs. Therefore, you should consider the appropriateness of the information in relation to your objectives, financial situation or needs, before acting on it. We are not licensed to provide financial product advice. You should read this information in conjunction with other relevant disclosure documents we have prepared. You should seek advice specific to your personal circumstances from a qualified financial adviser before making any decision with respect to your investment plan.

Page last updated 10 May 2019