Super returns struggle to remain positive

The sharp losses recorded on domestic and global share markets will probably mean superannuation funds posting more modest investment results for the 2018 calendar year, according to specialist research house, Chant West.

In a report covering October, Chant West said the median growth fund (61 to 80 per cent growth assets) had slipped three per cent, pulling back the return for the first 10 months to 2.4 per cent.

The company noted that, mid-way through November that figure had reduced further to an estimated 1.8 per cent.

Commenting on the findings, Chant West senior investment research manager Mano Mohankumar said that despite a disappointing October, growth funds still had a good chance of finishing in positive territory for the seventh consecutive calendar year.

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“However, this year’s return is certain to be well below the 10 per cent average of the previous six years,” he said. “But members need to remember that an average of 10 per cent is not normal. Growth funds are typically constructed to beat inflation by 3.5 per cent, which translates to about 6 per cent a year over the long term.

 “A more modest return this year doesn’t come as a surprise. Asset managers have been saying for some time that, given the exceptional run investment markets have had since the end of the GFC, most asset sectors are now priced at the top of their valuations, or close to it,” Mohankumar said.

“In October, domestic and global share markets experienced sharp losses. Australian shares fell 6.2 per cent. International shares retreated 6.8 per cent in hedged terms but the depreciation of the Australian dollar (down from US$0.72 to US$0.71) limited the loss in unhedged terms to minus 5.4 per cent. Listed property also slipped, with Australian and international REITs losing 3.1 per cent and 3.2 per cent, respectively.