Australian superannuation fund members should enjoy double digit growth for the year to June 2017, with returns for April up 1.5 per cent for median growth funds, according to Chant West.
It is welcome news for those nearing retirement whose incomes are being squeezed by negative real wage growth.
For the year to date, returns sit at 10.1 per cent and Chant West director Warren Chant said “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”.
The previous year median growth funds, which invest 61 per cent to 80 per cent of their portfolios in growth assets, returned 9.8 per cent. April’s positive performance was the eighth month of growth in fund values over the past 10 months.
“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,” Mr Chant said.
All major asset sectors delivered positive returns in April, led by listed shares and property. Australian shares were up 1 per cent, while international shares advanced 1.1 per cent 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 3.6 per cent as a weaker local currency put extra value on foreign denominated investments. Listed property also delivered strong returns, with Australian and global REITs up 2.6 per cent and 1.2 per cent, respectively.
“In the US, share markets were up in April, but the initial growth estimate of 0.7 per cent 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,” Mr Chant said.
Improved economic data in Europe and the victory of Emmanuel Macron over the anti-immigration and anti-EU Marine Le Pen, was a positive for markets which are looking for stability, he said.
China’s economy continues to show signs of improvement. However the possibility protectionist policies being implemented by US President Donald Trump remain a threat, he said.
“Back in Australia, the RBA kept interest rates on hold at 1.5 per cent 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.”
However, the influence of the global financial crisis continues to weigh down the ten year returns with only the Conservative category meeting its objective over this period of returns of 3.5 per cent above the consumer price index.
Retail funds edged out industry funds in April, returning 1.6 per cent compared to 1.4 per cent for industry funds. Retail funds also came out slightly ahead over the last three months due to their higher exposure to shares.