After a flat January, super funds had a better month in February with the median growth fund (61 to 80% growth assets) up 1.2%.  This brings the return over the first eight months of the 2017 financial year to a healthy 6.8%.

All major asset sectors delivered positive returns in February, led by listed shares and property. Australian shares advanced 2.2% while international shares were up 3.1% in hedged terms but, with the continuing appreciation of the Australian dollar (up from US$0.76 to US$0.77 over the month) this reduced to 1.5% in unhedged terms. Listed property also delivered strong returns, with Australian and global REITs up 4.1% and 3.3%, respectively.
 
Chant West director, Warren Chant says: "Growth funds have performed better than expected this financial year. With share markets up further so far in March, we estimate that growth funds are up more than 7.5% over the financial year to date. So with just over one quarter remaining, there is a good chance that they'll deliver an eighth consecutive positive financial year return. This is particularly impressive given the economic and political uncertainty that has been prevalent over the past few years.
 
"US share markets continued to rise in February as economic data continued to show improvement. Markets have also reacted positively to President Trump's promise of a 'phenomenal' tax plan, although further detail has yet to emerge. Steady growth, strong job gains and confidence that inflation is moving towards the Federal Reserve's target of 2% prompted it to raise the target overnight interest rate by 0.25% to a range of 0.75% to 1% last week.  That's the second rate hike in three months.
 
"In Europe, macroeconomic data released was positive but there remains some nervousness around political developments in the region. 2017 will be a busy political year with Germany, France and possibly Italy holding elections. And, of course, the uncertainty around the implications of last year's shock Brexit vote remains. However, the Dutch election result last week did alleviate some fears over stability in the region with Prime Minister Mark Rutte seeing off a challenge from anti-Islam, anti-EU populist, Geert Wilders.
 
"Closer to home, China's economic growth continued to show signs of stabilising. However, Trump's protectionist policies, if enacted, have the potential to set off a trade war that could be damaging. Back in Australia, the RBA kept interest rates on hold at 1.5% earlier this month citing an improvement in the global economy and a pick-up in business and consumer confidence. However, a further rate cut this year remains a possibility as GDP growth remains constrained."
 
Table 1 compares the median performance for each fund category in Chant West's Multi-Manager Survey, ranging from All Growth to Conservative. Over one, three, five and seven years, all risk categories have met their typical long-term return objectives, which range from CPI + 2% for Conservative funds to CPI + 5% for All Growth. However, the GFC continues to weigh down the ten year returns. Over ten years the higher risk categories failed to achieve their objectives, but Balanced and Conservative did. Over 15 years, only the All Growth category fell short of its objective having been hardest hit during the GFC.


MR-Table-1-Mar17.PNG
Source: Chant West
Note: Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.


Chart 1 compares the performance since July 1992 – the start of compulsory superannuation – of the Growth category median with the typical return objective for that category (CPI plus 3.5% per annum after investment fees and tax over rolling five year periods). The healthy returns in recent years, and with the GFC period now out of the calculation, have seen the five year performance tracking well above that CPI plus 3.5% target.


MR-Chart-1-Mar17.PNG
Note: The CPI figures for January and February 2017 are estimates.
 

Chart 2 compares the performance of the lower risk Conservative category (21 to 40% growth assets) median with its typical objective of CPI plus 2% per annum over rolling three year periods. It shows that Conservative funds have also exceeded their objective in recent years.


MR-Chart-2-Mar17.PNG
Note: The CPI figures for January and February 2017 are estimates.

Retail funds edge industry funds in February

Retail funds edged out industry funds in February returning 1.2% (versus 1.1% for industry funds). However, industry funds continue to hold the advantage over the longer term, having returned 5.5% per annum against 4.5% for retail funds over the ten years to February 2017, as shown in Table 2.


MR-Table-2-Mar17.PNG
Source: Chant West
Note: Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.

 

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