Australian superannuation funds have made a solid start to the new financial year, according to actuarial research and ratings house, Chant West.
Chant West principal, Warren Chant, said that after a tumultuous finish to 2015/16, super funds had got off to a good start and that over the September quarter, the median growth fund (61 to 80 per cent allocation to growth assets) had gained a solid 3.1 per cent.
The Chant West analysis said that listed share markets had represented the major driver for growth with Australian shares gaining 5.2 per cent while international shares were up 4.8 per cent on a hedged basis but, due to a stronger Australian dollar (up from US$0.74 to US$0.77), the return in unhedged terms was limited to two per cent.
It said listed property was mixed, with Australian real estate investment trusts (REITs) down 1.9 per cent over the quarter but global REITs were up 1.3 per cent.
“This was a solid quarter overall but the performance was far from consistent.” Chant said.
“Of the 3.1 per cent gain, 2.7 per cent was achieved in July. Since then we’ve had two months of fairly flat returns, and that’s mainly because investors are preoccupied about US interest rates and when the next rate hike will be.”
He suggested the nervous mood was likely to continue while uncertainty continued to surround global interest rates and the outcome of the US election and the downstream consequences of Brexit.
“Funds are finding it hard to identify undervalued assets that will deliver real returns, and this is compounded by the pressure they’re under to reduce investment fees,” Chant said.
“They’re going to find it tough to meet their long-term objectives, and members need to remain patient in the face of returns that are likely to be lower than what they’re used to.”
