Australia’s Biggest Pension Fund Says Get Ready for Low Returns

(Bloomberg) -- Australia's biggest pension fund has told investors to prepare for low, or even negative returns, as the economic growth cycle nears an end.

The warning that the good times can't last forever comes after AustralianSuper posted its 10th straight year of gains, with its default investment option returning 8.7% in the 12 months ended June 30. The gains helped lift assets under management to A$160 billion ($113 billion).

The weak Australian dollar boosted returns on overseas assets, while infrastructure, property and fixed-income markets all did well, Chief Investment Officer Mark Delaney said in a statement Thursday.

However, “we know that at some point in the future the fund will experience very low or even negative returns,” Delaney said. “As we start to get closer to the end of the current economic growth cycle, members need to prepare themselves for that.”

The warning follows Singapore's sovereign wealth fund reiterating its long-held view of dwindling returns amid the U.S.-China trade war, the likelihood of a no-deal Brexit, and over-hyped valuations in developed markets. At home, Australia's central bank cut interest rates to a record low 1% Tuesday to guard against a darkening global backdrop and attempt to revive a slowing economy and tepid inflation.

To contact the reporter on this story: Matthew Burgess in Melbourne at mburgess46@bloomberg.net

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe

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