ART sees double-digit performance

Head of investment strategy, Andrew Fisher, has shared how Australian Retirement Trust (ART) is positioned going into the new financial year as it posts double-digit returns for FY2022–23.

One of Australia’s largest super funds with 2.2 million members and over $240 billion in assets under management, the fund’s Super Savings Balanced delivered 10 per cent per annum.

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Fisher said the financial results have exceeded the fund’s expectations and are up from returns of 9 per cent in the previous financial year, despite the challenging environment.

“The result has exceeded our expectations at the start of the year, in the context of challenging conditions, it is an excellent result. We didn’t make much change during the year, there’s always positive incremental change and new investments and we always have a lot of cash inflows coming in that we can use to reposition the fund and adapt to what’s happening in markets,” Fisher said.

This is particularly the case in the property space where it has proactively sought to update valuations. The office sector particularly experienced material downward adjustments due to capital market disruption and occupancy declines during the year.

Fisher said: “The property adjustments we made will certainly help us next year in terms of performance but that’s not why we do it, we adjust to reflect what the investments are worth. You hear a lot about people manipulating valuations but that’s not the case, it’s important to get it right and one benefit is that you are not delaying bad news.

“It’s been challenging for office properties thanks to higher interest rates, higher inflation plus the obvious structural drivers in terms of working from home. The last six months we have seen that have implications in terms of transactions and rental vacancies are creeping up which has combined to see valuations come back a bit.”

He said the fund held less than 20 per cent in offices compared to 40–50 per cent in other super fund portfolios and instead, the fund invested in a broad range of properties such as student housing and retirement living all over the world.

Since February 2022, the fund has completed two successor fund transfer and announced several planned transitions including with AvSuper, Commonwealth Bank Group Super, and Alcoa Super. Fisher said this scale allows the fund to put money to work in a diverse range of investment options.

“Having scale definitely helps us, it means we are able to diversify really well and going forward it will help us even more as it is still an uncertain inflationary environment so scale gives us the ability to diversify extensively,” Fisher said.

“We are looking to diversify as much as we can for the next 12 months. From an inflationary perspective, on the one hand you have these structural forces that could keep inflation high and central banks could struggle to get inflation under control. Equally, you could see a hard landing and inflation goes back to being low so it’s a really uncertain environment and a challenging one.”