HESTA has delivered solid returns to members for the financial year outstripping the current rate of inflation by more than 5.65 per cent for its default MySuper investment option.

The $50 billion superannuation fund for health care professionals said Core Pool has achieved a return of 7.25 per cent underpinned by robust performances from Australian equities, private equity and infrastructure.

HESTA CIO, Sonya Sawtell-Rickson, called it a “fantastic result” and noted that Core Pool has delivered 8.32 per cent return over 5 years and 9.06 per cent over 10 years. This far exceeds the super fund’s target goal of CPI plus 3.5 per cent over 10 years.

However, she warned that returns will likely moderate over the medium term. “This [caution] has come on the back of very strong, often double-digit, returns over the past decade, which historically are not the norm and have been somewhat a ‘pull forward’ of future returns.

Sawtell-Rickson pointed to a range of indicators that indicate a weakening global economy. Central banks , she added, are moving towards an easing bias due to concerns about the deteriorating economic and trade conditions as well as ongoing low inflation.

“We are adopting a more cautious approach as we believe that we are approaching the later stages of the economic cycle. Domestically, we’re also closely monitoring the high level of household debt and softness in the housing market. This economic backdrop is likely to lead to continued volatility in the period ahead.”

Sawtell-Rickson noted that equity markets are pricing in the expectation that central banks will continue to cut rates and that they will remain lower for longer. And, she is seeing bond markets pricing the probability of deeper rate cuts, usually associated with a recession in the coming period. “History suggests that at inflection points, uncertainty heightens and volatility increases.”

In terms of investment strategy, the CIO aims to enhance member outcomes through dynamic asset allocation which needs to trade off return opportunities against risk and investment objectives.  “We continue to consider our positioning, incorporating the insights provided by our network of global fund managers and research partners, on a daily basis and stand ready to make adjustments in response to periods of volatility that represent opportunities for long-term investors like HESTA.”

Importantly, HESTA’s socially responsible investment option, Eco Pool, delivered a return of 11.03 per cent which the CIO put down to the expertise the fund has developed over many years as well as strong long-term relationships it has built with specialist managers.

“These managers are skilled at delivering Eco Pool’s strategy that’s focused on identifying companies that are ‘best in class’ across both financial and environment, social and governance (ESG) factors,” Sawtell-Rickson added.

The super fund launching its first eco pooled fund, one of the first in the country, back in 2000. Also, in line with the United Nations’ Sustainable Development Goals, HESTA has chosen seven such goals to align its portfolio with: good health and wellbeing, gender equality, clean water and sanitation, affordable and clean energy,

In its latest performance analysis of SRI options, SuperRatings rated Eco Pool as the top performing SRI option over three, five, seven, 10- and 15-year timeframes.

Eco Pool has delivered double digit returns in 5 of the past 7 years.

Elizabeth Fry has been a financial journalist for more than 25 years and has written for a number of publications, including CFO, The Financial Times and The Australian Financial Review.
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