Better performing super funds could see double digit 2017/18 returns

Super funds “look certain” to deliver a ninth consecutive year of positive investment returns, according to research and consulting firm Chant West.

The ‘median growth fund’, with 61-80% in growth assets, was up 0.4% for May. This took returns for the first eleven months of 2017/18 to a “healthy” 8.0%.

Mano Mohankumar, Chant West senior investment research manager, says the firm estimates that median growth funds will see returns of about 9.3% for the financial year, with better performing funds having a chance of double digit returns.

“Overall it’s shaping up as an excellent result when you consider that the typical long-term return objective for growth funds is to beat inflation by 3.5%, which in current terms translates to a return of 5.5% to 6%.”

“This year’s return won’t reach the heights we’ve seen in some recent years, but it’s important to keep things in perspective. Growth funds have had a fantastic run averaging 9% per annum over the past eight financial years so even to be close to that level this year is impressive, especially as asset managers have been saying for some time that all asset classes are close to or fully valued and that it’s becoming increasingly difficult to find additional sources of return.”

“The better performing funds this year have been those with higher allocations to listed shares and to unlisted assets generally. A lower exposure to traditional bonds and cash would also have helped greatly, because those have been by far the most disappointing sectors over the year.”

Australian shares were up 1.2%. International shares were up 1.3% in hedged terms, but only 0.4% unhedged due to appreciation in the Australian dollar.

Australian REITs were up 3.0%, while global ones were up 2.2%.

Industry and retail super funds tied performance for the month of May at 0.4%. Industry funds are ahead over the Financial Year-to-Date at 8.6% compared to 7.5% for retail funds.

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