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Super funds to end year on high
Superannuation fund returns are expected to close the calendar year at 14.5%, a much better result than predictions made earlier in the year, according to Chant West.
The research house said November experienced strong returns with the median growth fund (61% to 80% in growth assets) was up 1.9% for the month, pushing the return for the first 11 months to 14.4%.
However, markets in December so far had been relatively flat which suggested a calendar year return of 14.5%.
In November, Australian shares and hedged international shares were up 3.2%, and 4.7% for unhedged international shares. Listed property mixed with Australian real estate investment trusts (REITs) were up 2.3% but global REITs were down 0.9%.
Chant West senior investment research manager, Mano Mohankumar, said: “It has been a tremendous year for super funds with the median growth fund return on pace to finish in the mid-teens.
“That’s 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.”
Mohankumar noted that investors needed to understand that strong returns over the past decade were not sustainable over the long-term and needed to expect more modest returns in the future.
He said ongoing concerns included the slowing global economic growth and what central banks “had left in their armouries to counter it”, trade relations between US and China, and the uncertainty about what economic consequences Brexit would have.
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The deputy governor has warned that, as super funds’ overseas assets grow and liquidity risks rise, they will need to expand their FX hedge books to manage currency exposure effectively.
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