Investment returns at 30 September 2024, before fees and tax
| Growth Fund | Balanced Fund | Income Fund | |||
| 3 months | 4.4% | 3.9% | 3.0% | ||
| 1 Year (p.a.) | 16.6% | 14.1% | 8.8% | ||
| 3 years (p.a.) | 8.0% | 5.9% | 1.9% | ||
| 5 years (p.a.) | 9.0% | 6.6% | 2.1% | ||
| 10 years (p.a.) | 9.0% | 7.1% | 3.0% |
It’s been another quarter of positive performance by each of the funds. Long term returns (see the Last 3 Years column), particularly in income funds, will continue to reflect the low interest rate environment that existed around the pandemic. Hopefully the pandemic effect remains a thing of the past.
Our view of the markets has not changed. We still believe (and maybe even more strongly now) that major sharemarkets reflect an optimistic outlook. It is generally believed that the high point in inflation has been seen, that interest rate reductions will continue and that corporate earnings will not be greatly affected. Most central banks have already reduced their country’s official cash rate.
We disagree with the optimistic view currently being reflected in most sharemarkets. Whilst headline reported inflation is in no doubt reducing, the central banks (rightfully, in our view) remain concerned about domestic inflation. Central banks have less influence on certain domestic factors, e.g. council rates, insurance premiums and energy costs. We question whether interest rates will fall as quickly as expected by some, and what might happen to corporate earnings. Will central banks cut aggressively because they see a risk to the economy (and hence corporate earnings)? Will investors continue to pay higher amounts for the same level of corporate earnings? We think that there is a risk that interest rates don’t fall as fast as expected, that corporate earnings disappoint and, in those environments, investors pay less for prospective earnings.
Thus we remain cautious on the investment return outlook.
Geopolitical uncertainty (e.g. ongoing US / China tensions, ongoing conflicts in the Middle East, the war between Russia and Ukraine and possible fall-out from the US election), coupled with monetary policy uncertainties, continues to add to market volatility (ups and downs).
As such, in this environment we remain wary of asset prices. We remain cautiously invested, diversified, and continue to hold higher than normal amounts in cash.
