Hostplus Stands Firm Despite Poor Performance

In the 2023-24 financial year, Hostplus, one of the largest industry superannuation funds, reported one of the sector’s lowest annual returns for its default product. Despite this, the fund remains confident in its performance and steadfast in its long-term investment strategy.

Hostplus’ MySuper balanced option achieved a growth of 7.6% for the financial year. In contrast, many of its competitors saw double-digit returns, driven by the surge in global technology stocks. The median balanced super fund, typically a MySuper product designated as a default for new customers, returned approximately 8.8%, according to SuperRatings. During the same period:

• The S&P/ASX 200 recorded returns of 7.8%.

• The S&P 500 recorded returns of 22.7%.

Hostplus’ Chief Investment Officer argued the importance of long-term results over short-term gains. They claim the fund’s lower returns were not due to poor short-term market decisions but rather a commitment to a long-term investment strategy designed to yield results over 10 to 20 years. This approach aligns with the young demographic of Hostplus’ members and the inherently long-term nature of superannuation. The fund has consistently adhered to its long-term plan, maintaining a highly diversified portfolio across both listed and unlisted asset classes. This strategy has been a hallmark for the past 20 years and remains unchanged. While last year focused on listed markets, the fund is comfortable with its outcome.

Other major funds also reported lower returns for their default options:

• AustralianSuper delivered an 8.5% return, attributing the lower performance to a defensive stance around Christmas, which caused the fund to miss out on much of the tech rally.

• Cbus reported an 8.4% return, citing heavy exposure to unlisted property as a factor.

Hostplus’ long-term focus is underscored by the average age of its 1.8 million members, which is 37, compared to over 50 at some other funds. The fund’s commitment to diversification allowed its default option to be one of the top performers during the pandemic, a period when many funds experienced negative returns due to plummeting share markets.

Over the decade leading up to June 30, 2024, Hostplus’ MySuper balanced option returned an average of 8.3% per year, and 7.9% per year over the preceding 20 years. These figures surpass the fund’s investment targets of:

• CPI plus 3% over 10 years.

• CPI plus 4% over 20 years.

The fund’s growth was significantly bolstered by its exposure to global technology stocks, particularly the “Magnificent Seven” – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Nvidia, in particular, saw its value skyrocket, becoming the world’s most valuable company in June, driven by an investor frenzy around artificial intelligence.

Credit investments also delivered equity-like returns in the low single digits, which was remarkable. Infrastructure investments performed well as a strong mid-risk asset.

Hostplus’ balanced pension option reported a growth of 8.4%, while its indexed balanced option was among the sector’s strongest, with a 12.1% return. The fund’s strategy remained consistent, and the positive performance was largely due to the equity market’s momentum.

While Hostplus’ short-term returns may have lagged behind some of its peers, the fund’s unwavering commitment to its long-term investment strategy and diversified portfolio positions it well for sustained growth. The focus remains on delivering robust returns over the long haul, ensuring that members’ retirement savings are managed prudently and effectively. It’s always wise to consider various options and strategies to ensure your superannuation aligns with your financial goals and risk tolerance.

If you are unsure if Hostplus is the right fund for you, please reach out to review your situation.

‍