Rest Super remains “fully committed” to equities, even as it anticipates higher market volatility than experienced in previous decades.
Earlier this month, the fund reported a 9.85 per cent return for its MySuper default option for FY2024–25 – slightly below peers, many of which posted double-digit gains.
At the time, Rest attributed the performance to strong returns from listed equities, while unlisted assets continued to play a key role in diversification and portfolio stability.
Speaking to InvestorDaily, interim co-chief investment officer Kiran Singh reaffirmed the fund’s stance: “We remain fully committed in equities at this point.”
While acknowledging stretched valuations in the US and lingering uncertainty from newly implemented tariffs, Singh said he doesn’t foresee a “long-lasting, sharp decline in the US economy”.
“Our central case is one of growth moderation,” he said. “The extent of this moderation remains uncertain until the full scope of the tariff implementation is finalised.”
In anticipation of this, the fund has “quite significantly” wound back earnings expectations across markets from earlier in the year, to a position, Singh described as “more reasonable relative to the backdrop”.
“We still think that markets may trend higher from here but with higher levels of volatility than seen in the previous decade,” he said.
He highlighted several supportive factors for the US market, including “a weaker dollar, AI productivity gains, earnings growth still holding up at reasonable levels and the US Federal Reserve is likely to continue to ease policy over the next six to 12 months”.
Rest is also “closely monitoring” corporate earnings and the impact across sectors, while leaning into quality.
“[We] believe that the construct of our equity portfolio is better able to withstand any negative flow-on effects as a result,” Singh said, adding that it continues to look for value among companies with “strong fundamentals and healthy balance sheets”.
Moreover, markets outside the US have the potential to outperform, he added.
“We think that after a decade where the US sharemarket outperformed global ex-US shares, returns in other markets are now likely to be the near-term drivers of equity returns.”
On broader asset allocation, Singh said the fund’s strategy remains largely unchanged.
“We’ve added a little more in credit where we are still finding attractive risk-adjusted returns relative to alternatives,” he said.
“We view real assets as great diversifiers in the portfolio providing inflation hedging qualities and areas where we can continue to take advantage of longer-term thematic opportunities such as decarbonisation and digitalisation.”
Expanding on its performance in 2024–25, Simon Esposito, Rest interim co-chief investment officer, said the fund’s infrastructure asset class was “a key beneficiary”.
“Strengthening global travel activity benefited our holdings in airports and several of Rest’s long-standing directly held infrastructure assets also delivered strong returns,” Esposito told InvestorDaily.
“This was especially seen across energy infrastructure and renewable energy investments, highlighting the value of investing in quality long-term assets. Valuations also improved across our property portfolios, with Australian Retail, Sydney Office and Real Estate Credit the main contributors.”
On unlisted assets more broadly, he said they “play a very important role in building a resilient portfolio and will continue to do so”.
“They provide valuable diversification and resilience. In recent times this has been a helpful tool to offset the impact of heightened inflation we saw not so long ago, as well as ride out the ongoing volatility seen across many global markets,” Esposito said.
“We have a whole-of-fund approach to investments, where we are focused on the quality of investment management decisions across the board. This includes optimising our allocation to listed and unlisted assets and managing liquidity to meet our member requirements through market cycles,” he added.
