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Strong currency dents superannuation returns
The median superannuation growth fund returned 0.2 per cent in April, but would have returned more had further appreciation of the Australian dollar not reduced the unhedged returns of international shares, according to Chant West data.
It brought the cumulative return for the median growth fund to 10.2 per cent in the financial year to date, meaning a likely second straight year of positive returns for fund members, said Chant West director, Warren Chant.
The inflated Australian dollar appreciated against all major currencies over the current financial year, including a 30 per cent rise against the US dollar, he said.
“Unless you hedged against that currency movement, it took a big chunk out of the value of your overseas investment returns,” Chant said.
“We estimate that currency detracted about 3.5 per cent from the typical growth fund return over the financial year to date, with the better-performing funds being those that hedged more against the rising Australian dollar,” he said.
International shares returned 2.5 per cent in hedged terms in April but recorded a loss of 1.4 per cent in unhedged terms, and the Australian share market was down 0.3 per cent for the month. Australian and global real estate investment trusts grew by 0.3 per cent and 4.4 per cent respectively, Chant West stated.
Industry funds just edged out master trusts, returning 0.2 per cent against 0.1 per cent for the month, Chant West stated.
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The Australian Retirement Trust is adopting a “healthy level of conservatism” towards the US as the end of the 90-day tariff pause approaches, with “anything possible”.
Uncertainty around tariffs and subdued growth may lead to some short-term constraints in relation to the private credit market, the fund manager has said.
Just three active asset managers are expected to attract net inflows over the coming year, according to Morningstar, with those specialising in fixed income or private markets best positioned to benefit.
Taking a purely passive investment approach is leaving many investors at risk of heightened valuation risks, Allan Gray and Orbis Investments have cautioned.
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