Superannuation funds have made a positive start to the new financial year but face a challenging time ahead and need to prepare their members for returns lower than those they have become used to, according to actuarial research house, Chant West.
Chant West principal, Warren Chant said that after a tumultuous finish to 2015/16, super funds got off to a strong start in the new financial year with the median growth fund (61 to 80 per cent allocation to growth assets) gaining 2.7 per cent in July.
He said this strong performance was mainly the result of a sustained rally in share markets at home and overseas, reversing the sell-off that followed the shock Brexit result in the UK in late June. According to the Chant West analysis, Australian shares surged 6.4 per cent over the month and hedged international shares rose 4.1 per cent but, due to the appreciation of the Australian dollar (up from US$0.74 to US$0.76), this gain was reduced to two per cent in unhedged terms.
It noted that listed property also rose, with Australian and global REITs up 5.4 per cent and 5.1 per cent, respectively.
Chant said July had been an excellent month but it needed to be remembered that funds were operating in a low growth / higher volatility environment which was likely to continue for some time.
“…funds face a challenging period in terms meeting their long-term objectives, and members need to prepare for returns that are quite a bit lower than they’ve been used to,” he said.
