Super funds flat in July, returning 0% for the month

Superannuation fund investment returns were flat in July 2017, with share markets cooling, according to Chant West.

The median growth fund, which has 61-80% invested in growth assets, returned 0% for July, the firm says.

Equities provided mixed results, with Australian shares having a return of zero and international shares up 1.5% on a hedged basis and a loss of 1.7% in unhedged terms, due to appreciation in the Australian dollar. Listed property was also mixed, with Australian REITs down 0.2% and global REITs up 0.9%.

“The flat return in July comes as no surprise,” said Chant West director Warren Chant.

“While the economic outlook is looking much better than it did this time last year, investment markets have had a surprisingly good run and were set for a pause. We said a year ago that many asset sectors were close to being fully valued, and after a further run-up in prices it’s even harder now to identify undervalued assets that will deliver solid real returns. That’s going to be a serious challenge for super funds. They won’t be helped by the pressure they’re under to reduce investment fees, which we hope won’t inhibit their appetite for seeking out new sources of active returns.”

“Members need to remember that the typical long-term return objective for growth funds is to beat inflation by 3 to 4% per annum. That’s a return of 5.5% to 6.5% in absolute terms, so it would be unrealistic to expect another double digit return like last year – or even to match the 9% per annum that growth funds have returned over the past eight years.”

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