AMP, one of Australia’s largest retail superannuation funds, hopes to continue generating double-digit returns for the third consecutive year.
Head of Portfolio Design and Management Stuart Eliot said the financial services group’s medium-term forecast was for returns of 6% to 7% per year, depending on the risk profile of each member.
“My personal view is it'll probably be a little bit stronger than that so it would be pretty nice to do three years in a row of double-digit returns,” Eliot told Azzet.
With about A$55 billion of super funds under management in almost 590,000 accounts at 31 March, AMP this week announced returns of between 10.1% and 12.9% over one year and 5.4% to 10.2% over five years in its MySuper products.
This is in line with data from research house SuperRatings which estimated the median balanced super product in Australia returned 10.1% in the 12 months ended 30 June, compared with 8.8% in FY24 and 8.5% in FY23.
But it is counter to the conventional wisdom that funds managed by for-profit companies like AMP (ASX: AMP) produce lower returns and charge higher fees than industry and other profit-to-member funds.
Revived by restructure
Eliot said AMP’s returns for its members had improved since it changed its structure over the last four years by moving away from managed investment schemes (MIS) to using a single entity which provided the ability to generate better returns.
He said selling one fund and buying another one would have created a tax liability with transaction costs previously but now it was an accounting entry as assets were moved from one part of the portfolio to another.
The old system also limited its exposure to illiquid assets to 20% of the portfolio, constraining its buy ability to invest directly in asset classes like infrastructure and property that deliver attractive returns.
“That transformation through time is what unlocked the ability for us to start putting together returns like this,” he said in the interview.
AMP had also bulked up its allocation to government bonds, which were in high demand from banks for securities lending, along with private debt and diversified credit like securitised assets, loans, and high yield and emerging market debt.
“We get paid 20, 25 basis points for lending those securities out. It's pretty hard to generate 25 basis points doing anything these days,” Eliot said.
Growing its way out of private equity and direct infrastructure and property investments made more than a decade ago had been more challenging for AMP since the Banking Royal Commission but improved fund inflows in the last couple of years had allowed the firm to invest with more confidence.
Outlook positive
As for the outlook for investment markets in FY26 and beyond, he expected “more ongoing noise” around trade and politics but believed United States President Donald Trump had “front loaded” the “negative stuff” to leave a positive news flow from now.
AMP cut its U.S. equities exposure from overweight to benchmark weight in February ahead of Trump’s tariff announcements but with its new structure a “nimble” AMP uses ‘Liberation Day’-related volatility to buy equities on down days and trim on up days.
He also remained optimistic about the potential for artificial intelligence (AI) to drive economic growth and productivity and expected the benefits to spread from the so-called ‘Magnificent Seven' technology giants to the rest of the economy.
“Whether or not the Mag even end up becoming utilities effectively is an open question but (we’re) still looking for strong returns, and more globally based,” Eliot said.
“Excuse the pun but over the medium-term innovation trumps politics,” he said.
He said AMP’s direct infrastructure investments were focused on renewable energy because of the need for a multi-trillion dollar investment to upgrade the electricity grid for the energy transition.
“To attract that kind of investment means you have to be offering attractive returns because those investments will compete with everything else in the world and so (we’re) quite positive on the outlook for infrastructure assets as well,” he said.
Eliot also said AMP’s active allocation to shares in Commonwealth Bank of Australia (ASX: CBA), regarded by some as the most expensive bank in the world, was “zero or close to zero” on the recommendation of its external managers.
“We discussed it with them and they were adamant saying, ‘you cannot make me buy CBA at these prices.'"
