After suffering losses in January and February, super funds bounced back into positive territory in March on the strength of resilient share markets, according to Chant West.
The median growth fund was up 1.1% for the month, trimming the decline over the quarter to 2% with the research house noting the likely possibility of a positive 2021/22 positive result as the median return sat at 2.3% over the first nine months of the financial year.
Chant West senior investment research manager, Mano Mohankumar, said the positive outcome in March came despite the serious concerns that continue to weigh on investment markets – notably the Russia-Ukraine war and the threat of rising inflation and interest rates.
“Central banks around the world are faced with a dilemma; either increase the pace of interest rate hikes to combat inflation or hold back on the tightening in an effort to support economic growth.
“So far, it appears they view inflation as the more pressing issue and in March we saw the US Federal Reserve increase its target rate by 0.25%, with further increases expected through 2022. That pattern is likely to continue in the US and elsewhere unless the outlook for economic growth worsens significantly.”
Mohankumar said the Australian share continued its relative outperformance in March, buoyed by its high weighting to resource companies which had benefited significantly from rising commodity prices.
“Financials were also key contributors to the strong performance with large gains from the major banks,” he said.
“Over the month, Australian shares surged 6.9%. While international shares didn’t fare as well, they were still up a healthy 3% in hedged terms.
“However, the sharp appreciation of the Australian dollar over the period (up from US$0.73 to US$0.75 and from €0.64 to €0.68), turned that gain into a small loss of 0.9% in unhedged terms.
“Bonds continued to suffer as yields rise, with Australian and international bonds losing 3.7% and 2.1%, respectively, over the month.”