All-time highs are the norm

7 min read
7 min read

The median superannuation fund in the accumulation phase produced a return, after tax and investment fees, of 7.0 per cent for the year ending 30 June 2019. Over the 57 years of this study superannuation funds have returned 9.9 per cent per annum, exceeding Average Weekly Ordinary Time Earnings/Average Weekly Earnings (AWOTE/AWE) and price (CPI) inflation by 3.2 per cent pa and 4.9 per cent pa respectively. Table 1 depicts returns over multiple time periods to 30 June 2019. The biggest move this year was the rolling ten-year return which jumped from 6.5 percent per annum last year to 8.7 per cent per annum with the -12.9 per cent of 2009 dropping out of the series.

Table 1: Returns to 30 June 2019

Average Fund AWOTE CPI Real Returns
Returns vs AWOTE vs CPI
1 Year 7.0 3.1 1.6 3.8 5.3
5 Years 7.8 2.3 1.6 5.4 6.1
10 Years 8.7 3.2 2.1 5.3 6.5
15 Years 7.1 3.7 2.4 3.3 4.6
20 Years 6.7 4.0 2.6 2.6 4.0
25 Years 7.5 4.0 2.5 3.4 4.9
30 Years 7.9 4.0 2.6 3.7 5.2
35 Years 9.4 4.4 3.3 4.8 5.9
40 Years 10.4 5.3 4.0 4.8 6.2
45 Years 10.7 6.2 4.9 4.2 5.5
50 Years 9.7 6.6 5.1 2.9 4.4
57 Years 9.9 6.5 4.8 3.2 4.9

In previous years I have written about the relative serenity of only looking at returns once a year and 2019 was no different. This was a positive year with members again achieving healthy returns over wage and price inflation. Underneath this however were periods of extreme volatility and uncertainty. Equity markets fell over 12 per cent during the December quarter, and then subsequently recovered to finish the year with positive returns in the order of 11 per cent for the year.

Since 30 June the news cycle has continued to gyrate with world events and themes of uncertainty continuing to pervade. The term that has intrigued me as a harbinger of fear in the recent cycle is “the market is at all-time highs”. Yes, the term is also used as a rallying call in bull markets, but at the end of July it was being put out as something to be feared, something unusual. I understand the fear component as market corrections typically come after periods of strong returns. In this study, 2019 was the tenth straight year of positive returns. So, asking the question may be warranted, but are all-time highs the thing to be feared for long-term investors?

Figure 1 shows the growth of $1,000 invested in the average superannuation fund over the course of this study in both nominal and real (inflation adjusted) terms. Effectively, these are the indices underlying the return series in this study. As you can see the average superannuation fund is also positioned at an all-time high.

Figure 1: Growth of $1,000 invested in superannuation – 30 June 1962 to 2019

Growth of $1,000 invested - 30 June 1962 to 2019Over 57 years the index has finished the year at an all-time high 77 per cent of the time – this drops to 53 per cent in real terms because of the high inflation during the 1970s and 1980s. The longest stretch of NOT being at an all-time high were the 5 years from 2008 to 2012. The longest stretch of consecutive all-time highs were the 19 years from 1983 to 2001 – a lot of the up and down of the 1987 crash happened within the 1988 financial year.

In a world of positive returns and no volatility an investment is always at an all-time high. As demonstrated by this study, even with the volatility associated with growth assets, all-time highs are the norm as opposed to being an outlier event. As always it is the fundamentals supporting the price that should be the real focus, and even then, market highs have to be considered in the context of time frames and objectives.

Cash rates are another item in the spotlight as concerns on growth see central banks around the world looking to lower rates. On 3 July 2019 the Reserve Bank of Australia took the official cash rate to an historic low of 1.00 per cent per annum. How does this look in the context of this study?

Figure 2 looks at rolling 10 year returns for the typical superannuation fund, cash returns adjusted for 15 per cent tax and CPI. The reset of inflation and inflationary expectations though the 1990s is clear, as is the corresponding fall in nominal cash rates and superannuation fund returns. Cash returns were calculated using the Bloomberg AusBond Bank Bill Index adjusted for tax at 15%.

Figure 2: Rolling Average 10 Year Returns (30 June)

Growth of $1,000 invested in superannuation - 30 June 1962 to 2019

Figure 2 also highlights the sharp change in the relationship between cash and inflation over multiple decades. Talking about current rates is one thing, but seeing the impact of this change over time better highlights the impact on how people think about their investments. Consider somebody allocating to cash within superannuation in 1999, they would have seen real returns against CPI of 4.7 per cent per annum for the previous 10 years. In 2009 they would have looked back and seen what they actually achieved was 1.8 per cent per annum. Roll forward another 10 years to 2019 and the gap between the return on cash and inflation is now 0.4 per cent per annum. This is a marked change and one that has clearly impacted those relying on cash in their portfolio.

This drop in real cash rates has seen investors across the board hunting out investments that can deliver higher returns. What Table 1 and Figure 2 show is the ability of the typical superannuation fund to deliver meaningful returns over inflation through a well-diversified portfolio with a healthy allocation to growth assets. For superannuation fund portfolios the answer to this low return environment has not been one silver bullet but a collection of assets that can work together towards member objectives. So, while we may be breaking into unchartered territory in some areas, many of the tools that have delivered the outstanding results in this study are as relevant as ever.

About the study

The study was first published in the June 1980 edition of Superfunds. The objective of this long-term return study is to capture the investment experience of the typical superannuation fund member. These returns have largely been derived from the average rates of return of funds participating in various surveys with returns prior to 1 July 1970 based on representative asset allocations and sector fund returns from that period. While members have a wide choice of investment options today this study can only have one number. Historically the study has used the average return of funds with growth assets between 60 and 80 per cent of assets as the representative fund. From 1 July 2015 the median return of MySuper options has been used.

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Figures portrayed are after tax and investment fees and should be viewed in the context of the long-term trends and not as performance benchmarks. The annual returns from 2001 to 2015 have been sourced from the Morningstar Superannuation Survey – Growth category and MySuper category thereafter. CPI is the consumer price index, for all groups, as published by the Australian Bureau of Statistics. The real rate of return has been calculated as the ratio of the typical fund return to the rate of increase in AWOTE or CPI. Wage increases are those as published by the Australian Bureau of Statistics for full-time adults’ average weekly ordinary time earnings (AWOTE) from 1 July 1982 and for males’ average weekly total earnings prior to this. Cash returns in Figure 2 were calculated using the Bloomberg AusBond Bank Bill Index adjusted for tax at 15%.

This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. Past performance is not a reliable indicator of future performance.

Picture of By Anthony Serhan CFA

By Anthony Serhan CFA

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Derek Thompson

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Best Selling Author, Podcast Host of 'Plain English'

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Few speakers can match Derek Thompson‘s ability to synthesize mega-trends in society, labor, economics, technology, and politics. Put another way: Derek trawls the data sets and does the forecasting and deep reporting necessary to help us better understand how we live, how we vote, how we spend, and how we work.

In his paradigm-shifting #1 New York Times bestseller, Abundance (co-written with Ezra Klein), this award-winning journalist reveals how our policies and culture have pushed us into a world of scarcity (not enough housing, workers, or progress)—and offers a radical new path towards a world where housing is affordable, energy is plentiful, and innovation flourishes across industries.

He shares a compelling vision of a future where we have more than enough for everybody, and a practical, actionable roadmap for how to get there. It starts with taking more risks, building more expansively, and recognizing that we all have the power to create a world of abundance. “Everything’s utopian until it’s reality,” he says.

Carmen Beverley-Smith

Executive Director - Superannuation, Life & Private Health Insurance, APRA

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Carmen joined APRA in March 2023 and holds the role of Executive Director, Life and Private Health Insurance and Superannuation.  

She has had an esteemed career in financial services, spanning over 25 years. She has held diverse leadership roles at Westpac and Commonwealth Bank of Australia, including across risk, transformation and change, product and portfolio development, and sales and service. 

Prior to joining APRA, she held the role of General Manager, Risk Transformation Delivery Integration at Westpac. This involved leading the group-wide implementation of a suite of solutions to uplift risk management capability and develop data, analytics and reporting. 

Carmen leads with a values-driven approach and a particular interest in developing and mentoring talent. 

She holds a Bachelor of Commerce and Accounting, is a certified Chartered Accountant and a Graduate of the Australian Institute of Company Directors. 

Amy C. Edmondson

Novartis Professor of Leadership and Management, Harvard Business School

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School, a chair established to support the study of human interactions that lead to the creation of successful enterprises that contribute to the betterment of society.

Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021 and 2023; she also received that organization’s Breakthrough Idea Award in 2019, and Talent Award in 2017.  She studies teaming, psychological safety, and organisational learning, and her articles have been published in numerous academic and management outlets, including Administrative Science Quarterly, Academy of Management Journal, Harvard Business Review and California Management Review. Her 2019 book, The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley), has been translated into 15 languages. Her prior books – Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), Teaming to Innovate (Jossey-Bass, 2013) and Extreme Teaming (Emerald, 2017) – explore teamwork in dynamic organisational environments. In Building the future: Big teaming for audacious innovation (Berrett-Koehler, 2016), she examines the challenges and opportunities of teaming across industries to build smart cities. 

Edmondson’s latest book, Right Kind of Wrong (Atria), builds on her prior work on psychological safety and teaming to provide a framework for thinking about, discussing, and practicing the science of failing well. First published in the US and the UK in September, 2023, the book is due to be translated into 24 additional languages, and was selected for the Financial Times and Schroders Best Business Book of the Year award.

Before her academic career, she was Director of Research at Pecos River Learning Centers, where she worked on transformational change in large companies. In the early 1980s, she worked as Chief Engineer for architect/inventor Buckminster Fuller, and her book A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller (Birkauser Boston, 1987) clarifies Fuller’s mathematical contributions for a non-technical audience. Edmondson received her PhD in organisational behavior, AM in psychology, and AB in engineering and design from Harvard University.

 

Daniel Mulino MP

Assistant Treasurer and Minister for Financial Services

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Born in Brindisi, Italy, Daniel was a young child when he moved with his family to Australia. He grew up in Canberra and completed his first degrees – arts and law – at the ANU. He then completed a Master of Economics (University of Sydney) and a PhD in economics from Yale.

He lectured at Monash University, was an economic adviser in the Gillard government and was a Victorian MP from 2014 to 2018. As Parliamentary Secretary to the Treasurer of Victoria, Daniel helped deliver major infrastructure projects and developed innovative financing structures for community projects.

In 2018 he was preselected for the new federal seat of Fraser and became its first MP at the 2019 election, re-elected in 2022 and 2025. From 2022 to 2025, Daniel was chair of the House of Representatives’ Standing Economics Committee in which he chaired inquiries; economic dynamism, competition and business formation and insurers’ responses to 2022 major floods claims.

In 2025, he became the Assistant Treasurer and Minister for Financial Services.

In August 2022, Daniel published ‘Safety Net: The Future of Welfare in Australia’, which aims to explore the ways in which an insurance approach can improve the effectiveness of government service delivery.