Australia’s A$3.3 trillion ($2.2 trillion) pension industry had its worst performance in 14 years in 2022 as markets were hit by rising interest rates.
(Bloomberg) — Australia’s A$3.3 trillion ($2.2 trillion) pension industry had its worst performance in 14 years in 2022 as markets were hit by rising interest rates.
Default superannuation accounts known as MySuper, the benchmark used for industry performance, fell 4.3%, the worst result since the global financial crisis in 2008, according to research house Rainmaker Group.
Returns were weighed on by fixed-income assets, which lost value as central banks aggressively hiked rates to battle inflation.
“Sure this is not good, but compared to how the year seemed to be shaping up, not a bad result in retrospect,” said Alex Dunnin, Rainmaker’s executive director of research and compliance.
“The weak 2022 outcome stands in stark contrast to the stellar 2021 outcome, which was the best on record, showing that it’s swings and roundabouts.”
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Australia’s funds still outperformed a typical diversified portfolio, as they had previously shunned government debt in favor of alternative assets like real estate, infrastructure and direct lending in search of higher yields.
A globally diversified portfolio of 60% equities and 40% fixed interest lost more than 16% in 2022, according to Bloomberg data.
Australia’s funds have about a third of their stock and bond investments outside Australia, according to the Australian Prudential Regulation Authority.
“The kicker is that global fixed interest is likely to end the year down about 20%,” Dunnin said.
“Fixed interest, far from being the conservative buffer it usually is, has done as poorly as equities.”
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