Industry super funds trump retail peers in March quarter

Industry super funds managed to outperform retail funds over the March quarter, while also remaining ahead of their retail peers in the financial year to date, Chant West has said.

Diversified industry funds returned 0.2 per cent versus a -0.7 per cent return for retail funds in the quarter. Financial year to date, industry funds returned 6.5 per cent versus 5.3 per cent.

Also in the March quarter, the median growth superannuation fund posted a zero return, with the return for the first three quarters of the year remaining at 5.5 per cent, Chant West said.

The result for those funds with a 61 to 80 per cent allocation to growth assets came despite two consecutive months of falling share markets, the research house said.

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Recent months have seen volatility return to share markets, sparked by investor concerns over the prospect of rising inflation, rising interest rates and the potential consequences of US-China trade sanctions, Chant West said.

Over the quarter, unhedged international shares rose 0.8 per cent, Australian shares fell 3.8 per cent, while there were sharp falls in Australian and global property trusts, down 6.2 per cent and 5.3 per cent respectively, it said.

Chant West senior investment research manager, Mano Mohankumar said the March quarter was a great example of the benefits of diversification.

“Most listed share and property markets fell, but growth funds typically only have about 55 per cent of their members’ money invested in these sectors,” he said.

“By diversifying across other sectors such as unlisted infrastructure, unlisted property, bonds and cash, which all rose, they managed to smooth out the bumps and produce a flat return for the quarter.”

Mohankumar pointed out that the past six calendar years all produced positive returns averaging over 10 per cent, which is “not normal”.

“The typical long-term return objective for growth funds is in the 5.5 per cent to 6.5 per cent range, so even if the June quarter also turns out to be flat, the financial year return would still be in that range,” he said.