Super funds on track for bumper year of investment returns

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Superannuation funds are heading for a “bumper” year of investment returns in 2019, according to firm Chant West.

There is a “strong likelihood” of super fund investment returns being comfortably in the double digits for the 2019 calendar year, after a “strong” November.

The ‘media growth fund’ – with 61-80% invested in growth assets – was up 14.4% for the year to the end of November, after gaining 1.9% in the last month.

These gains were driven in part by gains in listed shares, with Australian shares up 3.2% for the month and international shares up 3.2% hedged for currency, or 4.7% unhedged. But listed property was “mixed”, with Australian REITs up 2.3% and international ones down 0.9%.

Chant West senior investment research manager Mano Mohankumar said it had been a “tremendous year for super funds”.

Ending the year with double digit returns would be a “much better result than what we could have expected at the start of the year and a major turnaround from a year ago when growth funds lost 4.6% in the December 2018 quarter and investor sentiment was decidedly negative”.

“This year’s return will also be the 10th positive calendar year in the past eleven, which in itself is quite an achievement.”

However the good news also came with a warning.

“Fund members will have every reason to be delighted when they see their end-December balances, but we do caution them not to get carried away. They need to understand that the strong returns they’ve experienced over the past decade aren’t sustainable over the long term, and they should expect more modest returns ahead.”

“Whatever the outlook, Australians should take comfort that their superannuation is generally invested in well-diversified portfolios with investments spread across a wide range of asset sectors. The typical growth fund has more resilience built in than it did a decade ago, so it is better positioned to weather a period of investment market weakness if that eventuates.”

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