Australia's Pensions Suffer Worst Year Since Financial Crisis
Comment of the Day

August 23 2022

Commentary by Eoin Treacy

Australia's Pensions Suffer Worst Year Since Financial Crisis

This article from Bloomberg may be of interest to subscribers. Here is a section:

Australia’s pensions posted their worst annual performance since the global financial crisis as markets were roiled by central banks’ aggressive rate hikes and the war in Ukraine.

Guardians of the world’s fifth largest pension pot shed A$92.8 billion ($64 billion) on investments in the fiscal year through June 30, the biggest loss for the period since 2009, according to Australian Prudential Regulation Authority data released Tuesday. That saw the pool of savings fall to A$3.3 trillion, wiping out a year’s growth. 

The performance was largely due to a A$140 billion loss in the June quarter as equity markets were roiled by fears of a slowing global economy. The funds had boosted their stocks allocations toward the end of last year, before global equity markets slumped following Russia’s war in Ukraine and central banks’ efforts to stamp out rampant inflation. 

Australia’s pensions are bracing for more volatility in anticipation that the global economy could be heading into recession. They’ve lifted their holdings of fixed income and cash, while their stock allocations are now at the lowest level since December 2020.
 

Eoin Treacy's view

Australia’s pension system is the envy of anyone who cares to look at such things. However, that does not insulate it from the universal challenge of bonds and equities falling in tandem. That’s something every pension fund has had to contend with this year. The biggest question by far is whether this is an anomaly or something we should be prepared to deal with for much of the next decade?

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