Balanced Super Funds Again on Track for Double-digit Returns

Release date: 23/04/2014

Balanced superannuation funds are on track for another year of double-digit returns in 2013-14 as global sharemarkets continue to rise.

SMH, by Sally Patten, 23 April 2014

The average balanced fund gained 10.5 per cent between July and March, putting it on course for another good year. Last year, the average scheme posted a 15.6 per cent rise, figures from research house Chant West show.

''With just one quarter remaining in the financial year, there is a good chance that funds will deliver a fifth consecutive positive return. Any gain from here to the end of June would ensure that the annual result finishes in the double digits,'' Chant West director Warren Chant said.

Performance over the past quarter was boosted by a 2 per cent rise in Australian shares and larger gains by Australian and global real estate investment trusts. International shares rose 1 per cent on a hedged basis, but fell 2.4 per cent on an unhedged basis because of the rise in the value of the local currency.

The strong performance means super funds are continuing to beat their long-term investment goals of achieving returns of about 3.5 per cent above inflation, or about 6.5 per cent a year. According to Chant West, the average super fund has added 7 per cent a year over the past decade.

In the past quarter, industry funds outperformed their retail scheme rivals, adding on average 1.1 per cent. The average retail fund posted a 0.8 per cent gain.

The gap comes as industry super funds step up their attack on retail funds, alleging the latter are attempting to frustrate a process for reviewing which super funds will receive billions of dollars of workers' compulsory contributions. Industry super funds have accused retail funds of trying to avoid competing for default super contributions on the basis of performance.

''There is a concern that the banks are seeking to avoid checks and balances on the selection of default super funds,'' said Industry Super Australia chief David Whiteley.

Under the contentious rules, a Fair Work Commission panel will select up to 15 default super funds that can be included in industrial awards.

In the 10 years to April, the average union-backed balanced scheme has added 7.2 per cent, against 6.5 per cent for the average retail fund, Chant West data shows.

''Industry funds have a significantly lower weighting to bonds, which have been among the worst-performing asset sectors in recent times [and] has seen industry funds outperform master trusts more recently despite strong sharemarket performance,'' Chant West said.

If funds end the year in positive territory it will be the fifth time they have done so in as many years.

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