Reflections on the past financial year from Chief Investment Officer, John Pearce

25 Jul 2023
6 min read

There was no shortage of bad news over the course of the 2022/2023 financial year. War kept raging in Ukraine, inflation remained stubborn, and central banks kept up the fastest rate hike cycle in decades. We also saw the collapse of a few regional banks in the USA which temporarily sparked fears of another global financial crisis. However, yet again, share markets managed to climb the wall of worry. The ASX200 recorded a 14.8% gain. The S&P500, fuelled by euphoria over the dawn of artificial intelligence (AI) was up an impressive 19.6%.

Against this background, all our investment options recorded positive returns, with our (default) Balanced Option recording 10.3% (or 11.8% for zero-tax pension accounts).

As is always the case, there was a range of returns. The following is a summary of the highlights and lowlights across individual companies and investment options.

With our funds under management now around $125 billion, our big investments are usually confined to large companies. The biggest gainers and losers in any given year are invariably small companies; while we may have some exposure to such companies in our index portfolios, they do not have a material impact on our overall performance. Accordingly, in this report the discussion will be limited to those companies in which we have invested greater than $1 billion.

Best performing companies (of significance to UniSuper)


With a return of 42.7% Apple once again takes top position. In fact, Apple has featured as one of our best performing companies in three out of the last four years. It is the metaphorical gift that keeps giving. Many of us know from personal experience that we get drawn into the Apple ecosystem and find it too compelling to leave, paying higher prices as we stay. Apple has an installed base of about two billion devices. In addition to the traditional business lines such as the iPhone and iPad, Apple is experiencing strong growth in Macbook and Watch sales. Add to this is increasing demand for services such as the AppStore. Apple now has a market value of c. $3 trillion so valuations do look stretched. Although, we had the same concerns when it was a $2 trillion company.


Another tech “darling” Microsoft delivered a circa 30% return this year. Microsoft Windows (installed base of 1.6 billion) still has no serious competitor in the enterprise software segment. The company has used its market power to establish itself as a leading player in the high growth cloud business (Microsoft Azure) and it is also at the forefront of developments in artificial intelligence.


In a corporate world that is increasingly dominated by the tech behemoths, it is noteworthy that BHP is in our top three performers for the second consecutive year. BHP’s 24.8% return was largely driven by China’s reopening which held up demand for commodities. Strong cashflows enabled the “Big Australian” to pay a whopping c. $20 billion in dividends over the 2023 financial year. This follows a dividend payout of c. $24 billion the previous year. To put this in context, over the past two years BHP has paid dividends that equate to approximately the total market value of Woolworths. The company owns some of the highest quality reserves of the critical materials required for the energy transition such as iron ore and copper, so its future looks bright. Furthermore, unlike the tech darlings, BHPs valuation looks far from stretched.

Worst performing company of (significance to UniSuper)


With a negative return of -19%, the horror story for the ASX continues. The replacement of the CHESS system has been a debacle from the outset, with ASX management over-promising and under-delivering. History is generally not kind to “big bang” strategies using unproven technologies and the CHESS replacement project was just that. Thankfully for shareholders, following a technical review by Accenture, the project has been scrapped and the ASX will pursue a more logical and incremental strategy to replace CHESS.

With a gross dividend yield now around 5% UniSuper continues to hold ASX. The main redeeming feature is that the core businesses account for around 85% of revenues and are performing very solidly. There has been a change of management and those responsible for the failures have been held accountable. Despite the steep fall in share price, ASX is still trading above where we accumulated the bulk of our position. However, it goes without saying that we should have trimmed the position when the first signs of trouble emerged. Hindsight is a wonderful thing.


It has been a rollercoaster ride for APA over the past two years. From being one of our best performers in the 2022 financial year (+33%), it has been one of the worst returning -9.0% in 2023. The fall was in part a correction from a very strong rally, and also a negative reaction to higher interest rates. The current share price looks well supported with a yield of 5.5%, expected to grow by 3% p.a. Furthermore, around 90% of APA’s contractual revenues are linked to inflation so we remain confident about its prospects in the medium term. The vast bulk of our APA investment sits in the Defined Benefit (DB) portfolio and its return profile is an excellent match for the DB’s liabilities.

Apart from ASX and APA, no other holding (of greater than $1 billion) experienced a negative return. However, Transurban (a very significant exposure), represented a “drag” on performance with a sub-par return of +3.4%. While traffic levels have staged a strong recovery, and with revenues growing in line with inflation, Transurban shares have also been buffeted by rising interest rates. Nevertheless, we remain very confident about Transurban’s prospects to sustainably grow dividends.

Best performing investment option

Global Companies in Asia (GCA)

Our top performing investment option was Global Companies in Asia which returned 21.0% for the year. Over 20% of the option is invested in the tech giants that are being swept up in “AI euphoria”, with the three largest holdings being Apple, Microsoft, and Alphabet. The portfolio also holds micro-chip makers nVidia, AMD, and ASML.

GCA seeks companies that are well placed to benefit from the growing wealth of Asian consumers, and the re-opening of China also proved to be a tailwind. A good example was the strong performance of LVMH, the owner of luxury brand Louis Vuitton.

The second best performing option for the year was the International Shares option, returning 16.4%. Over 16% of the option is exposed to tech companies deemed to be at the forefront of AI, so it’s no surprise that it sits so high on the performance league table.

Worst performing investment options

Australian Bonds

The Australian Bond option was the worst performing option, returning 0.9% for the year. Bond yields are ultimately driven by inflation and inflationary expectations. As it became clear that inflation was going to remain higher for longer, bond yields rose (and prices fell). Where bond yields go from here (about 4% at time of writing) will depend on the path of inflation. If the market deems that central banks are winning the war, and inflation is sustainably heading below 3%, we can expect to see a rally. The converse also applies. Unfortunately, it’s hard to add much more insight than…it’s a toss-of-the-coin.

Listed Property

The Listed Property option returned only 2.4% for the year. While still in positive territory, the outcome is disappointing given that the portfolio aims to be fully invested in “growth” assets. Options with a large allocation to growth assets are predominantly at the top of the performance table. The Listed Property option is split 50/50 across global and Australian real estate investment trusts, and it’s the former (-2.5%) that has been a big drag on performance. Commercial property, particularly the US office sector, has been severely punished. Valuations are now at such depressed levels that some US office assets are being priced as if they will be indefinitely empty.

Global Environmental Opportunities

Global Environmental Opportunities (GEO), with a return of +5.1% is also at the lower end of the performance scale despite the fact that it is fully invested in growth assets. A c. 20% exposure to green buildings was the primary drag for reasons described above. We need to bear in mind that GEO has been a strong performer over the long term. Since inception it has returned 13.2% p.a., including a stellar 48.9% in the 2021 financial year.

Concluding comments

The “return to earth” of the likes of GEO is a cautionary tale for those seeking to maximise returns by chasing whatever is running hot at the time. While the tech industry is currently surging, and the fundamentals of companies such as Apple and Microsoft are excellent, valuations do look stretched and a correction at some point is inevitable. Unfortunately, the nature of investing is that we just don’t know exactly when.

For more on how the financial year has played out and our short to medium term outlook, watch Chief Investment Officer, John Pearce’s latest video.

Please note that past performance is not a reliable indicator of future performance. The information above is of a general nature and may include general advice. It doesn’t take into account your personal financial situation, needs or objectives. Before making any decision in relation to your UniSuper membership, you should consider your circumstances, the PDS and TMD relevant to you (these are on our website), and whether to consult a qualified financial adviser. Comments on the companies we invest in aren't intended as a recommendation of those companies for inclusion in personal portfolios. Holdings are at 30 June 2023 and are subject to change without notice.

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