Mercer Super’s SmartPath default investment options delivered returns between 11.2 per cent and 11.7 per cent for the financial year ended 30 June 2024.
The fund clarified that this range was across age-based cohorts for members aged between 18 and 55.
Mercer’s Pacific acting chief investment officer Sue Wang deemed the results an “excellent” outcome against a backdrop of market volatility and uncertain economic conditions.
“Equity markets enjoyed a very good year as inflationary pressures slowed. The US equity market was a particularly strong performer – up 24 per cent for the year,” Wang said.
“Bond market returns were modest and returns for unlisted assets were varied – global infrastructure funds continued to enjoy strong returns, while returns for domestic property funds were weak overall.”
The fund’s portfolio positioning, she said, comprised a “slight” bias towards equity markets and was underweight in private market assets such as unlisted property. This, Wang said, has proven to be a benefit for members over the period.
However, the $70 billion fund expects market volatility to remain high over the next 12–18 months against a backdrop of key elections.
“The global economic outlook, however, has improved as unemployment is expected to remain low and there is potential for interest rates to be lowered as inflation continues to moderate,” Wang said.
“As a result, we remain focused on maintaining the appropriate level of risk and diversification for our default investment options, supporting retirement outcomes now and in the future.”
Mercer’s SmartPath is a lifecycle default product, which gradually reduces risk exposure as members age past 55 years.
“Creating a default fund that takes an appropriate amount of investment risk based on the age of its members is one of the most important decisions a trustee can make in supporting the retirement outcomes of members,” Tim Barber, Mercer Super’s CEO, said.
The results follow Mercer Super’s launch of Mercer Business Super earlier this year, focused on solving the needs of organisations that are seeking to enhance their employer-supported super offering.
The fund confirmed in May that it will offer services and products that have traditionally catered to large employers in the corporate sector, to micro as well as small and medium-sized businesses (SMEs). This will include businesses with 20 employees or fewer, which comprise the bulk of the country’s businesses.
Mercer Super said that this segment, which represents approximately 2.5 million businesses in Australia, does not require complicated arrangements yet has been “limited” in its ability to access the benefits of tailored super fees and insurance arrangements due to the smaller size of its employee base.
