After a brief shock to the system, equity markets have rallied strongly on the back of Donald Trump’s upset win in the US presidential election, with Australia’s superannuation investors among the immediate beneficiaries, according to SuperRatings.
However, SuperRatings warned investors to prepare for a potentially rocky ride as markets continue to adjust to the changing political landscape.
SuperRatings’ analysis showed that the median balanced option returned 1.2 per cent in November, reversing the impact of a sustained market slide heading into the election.
“The turnaround in equity markets has been remarkable, and has resulted in a significant boost to superannuation fund balances in November,” said SuperRatings Chairman Jeff Bresnahan.
“The median balanced option has returned an estimated 3.3 per cent in the five months since June and 5.0 per cent over 12 months, underlining the strength of superannuation despite a tumultuous 2016.”
The results also saw industry super fund returns inch even further ahead of bank-owned retail funds over the short, medium and long term compared to bank-owned funds.
According to independent agency, SuperRatings, industry super funds have out-performed bank-owned retail funds by 2.33 per cent on average over ten years.
The margin for industry fund outperformance is growing as in December 2015 was 2.03 per cent.
Industry Super Australia chief executive David Whiteley said the figures meant industry super funds would end the year, once again, on a high.
“A member-first ethos has seen industry super funds accelerate even further ahead of bank-owned funds in 2016,” he said.
“Industry super funds invest for the long term in infrastructure and other ‘unlisted’ assets such as property, and are run only to profit their members”.
“The trustee boards are made up of representatives of unions and employer groups – not finance insiders like the bank-owned retail super funds”.
“Industry super funds have avoided the consumer losses and scandals associated with the big banks and their wealth management machines”.
SuperRatings warned that although the immediate ‘Trump effect’ has been positive, however, there is still a lot of uncertainty around the president-elect’s policies and what they will mean in practice.
“With the recent rotation into equities and the continued surge in commodities, it appears investors are expecting a more inflationary environment in the future, which will impact wages and prices in Australia,” said Mr Bresnahan.
“But it remains to be seen whether recent market gains will be sustained, and we would expect a period of volatility as markets adapt to the changing political landscape.”