Super funds were again in positive territory in April with the median growth fund (61 to 80% growth assets) up 1.5%. This was the eighth month of positive performance out of the past ten, and the cumulative return for the financial year to date now stands at an impressive 10.1%.
All major asset sectors delivered positive returns in April, led by listed shares and property. Australian shares were up 1%, while international shares advanced 1.1% in hedged terms. However with the slide in the value of the Australian dollar over the month (down from US$0.76 to US$0.75), the return in unhedged terms was boosted to 3.6%. Listed property also delivered strong returns, with Australian and global REITs up 2.6% and 1.2%, respectively.
Chant West director, Warren Chant says: "Growth funds have performed better than expected over the first ten months of the 2017 financial year. With the cumulative return sitting at 10.1%, it is almost certain that they'll finish the year in the black for the eighth consecutive time – and quite possibly in the double digits. This is particularly impressive given that we're still in a period of considerable uncertainty, both economic and political. It seems investors are looking through the uncertainty and focusing on the economic and market outlook, which is certainly looking better than it did 12 months ago.
"In the US, share markets were up in April but the initial growth estimate of 0.7% annualised for the March quarter was disappointing. However, this can be attributed partly to seasonal factors, and commentators are saying that it's not a true picture of the economy's health as employment and consumer confidence are both strong.
"In Europe, we again saw improving economic data in April. Last week's French election result with Emmanuel Macron easily prevailing over his rival, the anti-immigration and anti-EU Marine Le Pen, provided much relief. This is on the back of the Dutch election result two months ago, and together they have helped to alleviate some fears about stability in the region.
"In the Asia Pacific, China's economy continues to show signs of improvement. It remains to be seen, however, whether President Trump's protectionist policies will ever make their way into law, in which case they may spark a trade war that could be damaging given China's importance as a global trading partner.
"Back in Australia, the RBA kept interest rates on hold at 1.5% earlier this month, citing the improvement in the global economy. The federal Budget was also handed down and, despite some contentious measures including an unprecedented levy on five major banks, has generally been well received."
Table 1 compares the median performance for each fund category in Chant West's Multi-Manager Survey, ranging from All Growth to Conservative. Over one, three, five and seven years, all risk categories have met their typical long-term return objectives, which range from CPI + 2% for Conservative funds to CPI + 5% for All Growth. However, the GFC continues to weigh down the ten year returns with only the Conservative category meeting its objective over this period. Over 15 years, only the All Growth category fell short of its objective having been hardest hit during the GFC.
Source: Chant West
Note: Performance is shown net of investment fees and tax. It is before administration and advisor commissions.
Chart 1 compares the performance since July 1992 – the start of compulsory superannuation – of the Growth category median with the typical return objective for that category (CPI plus 3.5% per annum after investment fees and tax over rolling five year periods). The healthy returns in recent years, and with the GFC period now out of the calculation, have seen the five year performance tracking well above that CPI plus 3.5% target.
Note: The CPI figure for April 2017 is an estimate.
Chart 2 compares the performance of the lower risk Conservative category (21 to 40% growth assets) median with its typical objective of CPI plus 2% per annum over rolling three year periods. It shows that, now that the GFC years have faded into history, Conservative funds have also returned to exceeding their performance objectives.
Note: The CPI figure for April 2017 is an estimate.
Retail funds edged out industry funds in April, returning 1.6% (versus 1.4% for industry funds). However, industry funds continue to hold the advantage over the longer term, having returned 5.4% per annum against 4.6% for retail funds over the ten years to April 2017, as shown in Table 2.
Source: Chant West
Note: Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.
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