Superannuation funds are within sight of double digit investment returns for the 2017 calendar year.
According to Chant West a “surge” in returns in October could see super funds pass 10% returns for the year, with returns over the first ten months at a “very healthy” 8.6%.
The median growth fund, with 61-80% in growth assets, gained 2.3% in October. This was largely driven by the share markers, with Australian shares up 4% and international shares up 4.3% in unhedged terms and 2.5% in hedged terms. Australian REITs were up 2.2% and international ones up 0.2%.
“With less than six weeks of 2017 remaining, it’s almost certain that growth super funds will finish in the black for the sixth consecutive year,” said Chant West director Warren Chant.
“With the year to date return sitting at 8.6%, a double digit return for the year is a distinct possibility. That would be the best result since 2013, when growth funds delivered a staggering 17.2%,” he said.
“Looking back, not many people would have predicted such a strong result. It was around this time last year that Donald Trump claimed a shock victory in the US election and markets braced for what was to come. Yet despite the uncertainty that came with that result, global share markets have taken it in their stride. Investors have focused on the improving economic data and markets have surged, with Wall Street and some other world markets reaching new all-time highs.”
“US economic data in October was generally positive, with better than expected GDP growth over the September quarter of 3% annualised. The Eurozone’s economy continued to show signs of recovery, with unemployment back below 9% – the lowest rate since January 2009. The European Central Bank also provided a positive assessment of the outlook for the region, announcing that quantitative easing would be extended to September 2018 but that the pace would be pared back. In the UK, Brexit negotiations continue to dominate news with both the political and economic outlook remaining unclear.”
“In the Asia Pacific, the Chinese economy continues to show signs of improvement which is good news for Australia given our strong trade links. Back home, the RBA has again kept interest rates on hold at 1.5%, citing the continuing improvement in the global economy.”
Retail funds outperformed industry funds 2.6% to 2.2% in October, though industry funds are ahead on the calendar year-to-date (9.1% to 8.1%) and one year basis (12.9% to 11.7%).