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Fluctuating share market limits super fund returns

Median superannuation fund growth retreated 0.2 percent due to faltering share markets in May this year, but the news isn’t all bad with the return to date for the financial year reaching 10 percent.

While international shares fell 1.2 percent in hedged terms, the depreciation of the Australian dollar from US$1.10 to US$1.07, changes this return to a 0.7 percent gain in unhedged terms. The Australian share market however, decreased 2 percent for the month.

Chant West director Warren Chant explained that at the end of May, the median growth fund was heading towards a double digit return for the financial year, however in June the share markets retreated so members will probably receive a high single digit return.

“This is still a pleasing result and can be viewed as a year of consolidation on the back of last year’s 10.4 per cent return. We estimate that the return to the end of June will be about per cent after investment fees and tax, which is above the long-term expected return of about 7 per cent a year for growth funds,” he said.

Chant divides the financial year to date into two distinct trends. The first half of the year saw strong domestic and global share markets drive growth funds up 7.2 percent. However, the second half has seen share markets fluctuate with concerns over a slowdown in China, negative data from the US and the debt crisis in Europe.

Also holding back returns this financial year is the appreciation of the Australian dollar from US$1.07 to US$0.85 detracting about 3 percent from the typical growth fund.

Industry funds and master trusts performed broadly in line  with each other for the month, whilst industry funds continue to hold the  advantage over the longer term.

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