Share market strength positive for super funds

The ongoing rally in the share markets has treated superannuation funds well, with Chant West finding that the median growth fund gained 2.7 per cent in February, up 0.2 percentage points on the month before.

This came off the back of Australian shares jumping six per cent in February and their international counterparts growing 3.3 per cent in hedged terms and 5.6 per cent unhedged. Listed property also rallied, with Australian and international REITS growing 1.8 and 0.3 per cent respectively.

Chant West senior investment manager, Mano Mohankumar, said that the strength of the share market was the main factor driving growth fund performance, more than offsetting the impacts of the December quarter’s market slump.

“The worst thing to do after the December quarter falls would have been to switch into a more conservative option with a lower exposure to shares. Not only would you have locked in the losses, but you would also have missed out on the January and February rebound,” he said. “As always, the message is to choose an appropriate option and stick with it.”

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Mohankumar warned however, against getting carried away with confidence in the share market rally, particularly globally.

“The share market rebound has been driven partly by optimism that the trade dispute between the US and China is closer to resolution, with the US suspending its plan to increase tariffs on Chinese goods. In the UK, meanwhile, the Brexit puzzle is still a long way from being solved but at least there are signs that a hurried exit from the EU may have been averted,” he cautioned.

“The concerns about China-US trade relations, Brexit and the pace of global economic growth may have lessened but they have not gone away. Additionally, most asset sectors are still fully valued or close to it, so there are no easy sources of return for asset managers.”

The research house also found that the performance from lifecycle products was what they would expect at this point, with older members having being shielded from risk over the problematic December quarter.

At the same time, it found that at last month’s end, long-term performance for superannuation funds was once again above target.