Super funds have continued their steady start to the new financial year.  Listed share markets, which are the main drivers of growth fund performance, had a positive September quarter and as a result the median growth fund (61 to 80% growth assets) gained 1.5% over the quarter.

Australian shares produced a 0.8% return for the quarter while international shares fared much better, gaining 4% on a hedged basis. However, the appreciation of the Australian dollar (up from US$0.77 to US$0.78) reduced this to 2.5% in unhedged terms. Listed property was also up, with Australian and global REITs advancing 1.9% and 1%, respectively.

Chant West director, Warren Chant says: "Around the world, with a few exceptions, economic conditions continue to improve. That has been reflected in most of the major listed markets where share prices have moved higher in recent months. Australia has been slower than most in this upward trend, and our market moved very little over the September quarter, although it has lifted so far in October. The other main laggard has been the UK, still beset by uncertainty about the ramifications of Brexit.

"Over the quarter, macroeconomic data in the US was generally positive, including GDP growth for the June quarter being revised upwards from 2.6% to 3.1%. A healthy company earnings reporting season also supported equity markets. The US Federal Reserve has indicated that another interest rate rise is likely by the end of the year.

"Economic data out of Europe also remained positive. The European Central Bank has discussed various scenarios relating to its stimulus measures but details of any further tapering measures have yet to be released. 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 kept interest rates on hold at 1.5%, citing the continuing improvement in the global economy.

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 and fifteen 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 with only the Conservative category meeting its objective over this period.

 

MR-Table-1.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.PNG
Source: Chant West
Note: The CPI figures for the September 2017 quarter is an estimate.


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, now that the GFC years have faded into history, Conservative funds have also returned to exceeding their performance objectives.

 

MR-Chart-2.PNG
Source: Chant West
Note: The CPI figures for the September 2017 quarter is an estimate.

Industry funds ahead of retail funds over September quarter

Industry funds outperformed retail funds in September (1% versus 0.7%) and over the September quarter (1.7% versus 1.4%). Industry funds also continue to hold the advantage over the medium and longer term, ahead by between 0.7% and 1.3% per annum, as shown in  Table 2.

 

MR-Table-2.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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