Fifth consecutive year of positive investment returns for super funds

Superannuation funds have recorded their fifth consecutive calendar year of positive investment returns, according to Chant West.

Super fund investments delivered a “health return” for the 2016 calendar year, assisted by a “late surge”.

Chant West calculated that the median growth fund, with 61-80% in growth assets, returned 7.7% in 2016. Investment returns for individual growth funds ranged from 4.2% to 10.1%.

“Members should be very pleased with the 2016 result, which was achieved against a backdrop of unsettled global politics and a relatively weak economic environment,” said Chant West director Warren Chant.

“Super funds have actually had a very good run since the end of the GFC.  There’s only been one negative year in the past eight, and that was the small loss of 1.9% in 2011.  Other than that it’s all been positive, and the cumulative return over that eight year period now amounts to about 93%, or an average of 8.6% per annum.  That’s nearly 6.5% above the annual rate of inflation, so it’s comfortably ahead of the typical long-term objective for these funds which is to beat inflation by 3 to 4% annually.”

“Three of the key stories in 2016 were the shock ‘Brexit’ vote, the equally surprising Donald Trump election victory and the timing of the second US interest rate hike.  All of these created uncertainty, but share markets again proved how resilient they can be.  Investors chose to focus on the gradual improvement in the US economy and what that might mean for global growth, and as a result international shares returned 8.9% in hedged terms and 7.9% unhedged.  Australian shares did even better, returning a healthy 11.8%.”

While acknowledging the solid returns in 2016, Mr Chant encouraged super fund members to think long term.

“With the growing importance of retirement income streams within super, most people will have money in the super system long after they retire. By all means look at what your fund delivered in 2016, but what’s really important is to know what its long-term objectives are and whether it’s achieving them.”

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