Super funds “increasingly likely” heading for positive financial year

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Super funds are getting closer to recording a tenth consecutive year of positive investment returns, according to Chant West.

The firm has the ‘median growth fund’ – with 61-80% in growth assets – up 1.7% for the month of April. This leaves the return for the 2018/19 financial year-to-date at 5.2%.

Australian shares were up 2.5% for the month. International shares did even better – up 3.8% hedged for currency, and up 4.6% unhedged due to a decline in the Australian dollar.

However listed property was down, with Australian REITs down 2.3% and international ones down 1.1%.

Chant West senior investment research manager Mano Mohankumar said that it is “increasingly likely” that ‘growth’ funds will end the 2018/19 financial year with positive investment returns, which would be the tenth consecutive year.

“The return isn’t likely to match the 9% average return of the past nine years, but that strong run should be seen as the exception rather than the rule. With inflation running at about 1.5%, a return of about 5% would be broadly in line with the long-term return objective which is to beat inflation by 3.5%,” he said.

“The strong share market performance in April was on the back of encouraging economic data and ongoing dovishness from major central banks around the world which supported an appetite for riskier assets.”

“While the results over the past four months have been positive, we caution members not to get carried away. In the past week we’ve seen the re-emergence of trade tensions between the US and China, prompting a retreat in global share markets so far in May. And while concerns about Brexit and the pace of global economic growth may have lessened, they are still lingering at the back of investors’ minds.”

SuperRatings says that super funds “remain on track to beat expectations for the June quarter, which is historically the weakest period of the year”.

SuperRatings also found the ‘typical balanced option’ was up 1.7% in April, and has it up 5.3% for the financial year-to-date.

As is often said, past performance is not an indicator of future performance.

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