Superannuation funds had modest investment gains in August, after “surging” in July, according to Chant West. The ‘median growth fund’ was up 0.3% for the month and up 3% so far in the 2016/17 financial year.
Australian shares were down 1.6% for the month of August, with international shares up 1.3% excluding currency changes and up 0.5% on a hedged basis. Listed Australian property was down 2.7%, global REITs fell 2.2%.
“We had two straight positive months to open this financial year, but the past couple of weeks have seen markets become more jittery amid growing expectations of a further interest rate hike in the US, so some of those earlier gains have been given back,” said Chant West director, Warren Chant.
“This nervous mood is likely to continue while there’s still uncertainty about global interest rates, the outcome of the US election and the consequences of Brexit, among other concerns. Most asset sectors are now fully valued or close to it, so it’s hard to find reliable sources of real return. Super funds are going to find it tough to meet their long-term objectives, and members need to remain patient and recognise that in this low growth / higher volatility environment they’re likely to experience a period of lower returns.”
“In August, markets in the Eurozone were helped by a strong earnings season which saw a surprising number of companies exceeding market expectations. In Britain, meanwhile, the Bank of England launched a series of monetary easing measures in the wake of the uncertainty following the Brexit vote.”
“Mixed economic data in the US, including weaker than expected retail sales, have led to speculation about the timing of the next interest rate rise. While this timing issue is dominating market sentiment, far more important will be the pace at which rates are increased over the next few years. The Federal Reserve will be concerned not to risk stalling the economic recovery, while at the same time trying to stave off any breakout in the rate of inflation beyond its target range.”
“Closer to home, there remains concern over the pace of growth of the Chinese economy where further monetary easing is expected. Meanwhile, back in Australia, the RBA kept interest rates on hold at 1.5%, with a further cut this year remaining a possibility.”
Industry super funds outperformed retail funds in August, up 0.4% for the month compared to 0.2% – net of investment fees but before admin fees and commissions. Industry funds are also ahead on a 1 year basis, 7.6% to 5.6%. However retail funds are ahead for the financial year to date, 3.1% to 3.0%.
As is often said: past performance is not an indicator of future performance.