Asset classes: Naming the investment winners for the 2011/2012 year

Note: For the investment winners of the 2012/2013 financial year, see SuperGuide article Asset classes: Naming the investment winners for the 2013 financial year.

This article contains 2011/2012 performance data for 13 asset classes (or sub-categories). At the end of the article we have included performance data for the 2010/2011 year as a handy historical reference.

If you’re a regular reader of the daily newspapers, or an avid watcher of the financial news on television, you may be slightly dizzy from the yo-yo effects of the international and Australian sharemarkets. The table set out later in the article lists the performance figures for 13 asset classes (or sub-categories) for investment periods of 3 months, 6 months, 1 year, 3 years, 5 years, and, if applicable, 7 and 10 years.

According to rating company, Chant West, the key points relating to investment performance during the 2011/2012 financial year are:

  • Australian and international bonds (hedged) were the best performers with Australian bonds returning 12.4%, and international bonds (hedged) returning 11.6% for the year
  • Australian shares lost 7%
  • International shares lost 2.1% in hedged terms, although if international share investments were unhedged, the loss was reduced to 0.5% (due to the depreciation of the Australian dollar: falling from US$1.07 to US$1.02),
  • Listed property investments performed well with Australian REITs gaining 11%, and global REITs gaining 8.3%
  • Unlisted assets delivered positive returns

Background: Briefly, when a super fund hedges your international investments against movements in the Australian dollar or foreign currency, your investment return is solely based on the merits of the investment rather than the strength or otherwise of the Australian dollar. If your super fund chooses not to hedge your international investments, then the return you may receive on this part of your portfolio may have very little to do with the merits of your investment. I explain the significance of hedging in more detail, and my views on the practice within default super funds, in a recent SOAPBOX article: Ban unhedged international shares in default investment options.

How do super funds invest your money?

Your super fund invests in a mix of asset classes to generate an investment return on your super account, which means that some of your super money is likely to be invested overseas, a fair chunk invested in Australian assets, and a portion squirreled away in cash. The super money of most Australians is invested via a balanced or growth investment option, typically 61-80% of assets are in growth-style assets such as shares, property and alternative investments. The remaining 20-40% of super money is invested in income-style assets such as cash and fixed interest (bonds).

If you choose your own investment option, or you run your own super fund, then you decide on the mix of asset classes for your super savings, including whether you have exposure to international assets, and whether you have exposure to foreign currency movements (that is, unhedged).

Top performing asset classes for 2011/2012 year

The top-performing asset class for the 12 months to 30 June 2012 was Australian bonds with a healthy 12-month return of 12.4% before deducting fees and taxes, according to rating company Chant West. The second top-performing asset class for the 2011/2012 year was International bonds (hedged) with a 12-month return of 11.6% before fees and taxes, although closely followed by Australian listed property trusts (REITs) with a 12-month return of 11%.

Australian shares lost 7% for the 12 months to 30 June 2012, while international shares (hedged) lost 2.7% before deducting fees and taxes, and international shares (unhedged) lost half a per cent (-0.5%) for the year. For full details refer to table below. 

Top performing asset classes for 10-year and 5-year periods to 30 June 2012

The top performers among the 13 asset classes (or sub-categories) are different when you look over a longer timeframe. For example, over a 10-year period, Australian unlisted property has outperformed all asset classes with an average annual return of 9.5%, followed by international bonds (hedged) with an annual return of 8.2%. Australian shares come in third with an annual return of 6.9%, and which is closely followed by Australian bonds with an average annual return over a 10-year period of 6.8%. For full details refer to table below.

Note: Figures over the 10-year period to 30 June 2012 don’t include performance statistics for private equity, global listed property, global listed infrastructure (hedged) unlisted infrastructure, and hedge funds, due to the relatively recent development of these asset sub-categories. 7-year figures do not include a return for Global listed infrastructure (hedged).

The devastating effects of the Global Financial Crisis (GFC) can be seen in the 5-year performance figures for the higher risk asset classes, such as shares, listed property and, to a lesser extent, private equity. The top performers over the 5-year period are:

  • international bonds (hedged) with an average annual return of 9.6%
  • followed by Australian bonds (8.2%), and then cash (4.5%)

The worst performers for the 5-year period to 30 June 2012 are:

  • Australian listed property (REITs) with an average loss of 12.6% for each of the 5 years. What this means for investors in A-REITs, is that their A-REIT investment has more than halved in value in the space of five years.
  • International shares (hedged) with an average annual loss of 6.7%
  • Australian shares with an average annual loss of 4.2%

Asset Sector Performance: Gross performance to June 2012

Asset Sector

3 Mths (%)

6 Mths

(%)

1 Yr (%)

3 Yrs (% pa)

5 Yrs (% pa)

7 Yrs (% pa)

10 Yrs (% pa)

Australian Shares

-5.0

3.1

-7.0

5.6

-4.2

3.8

6.9

International Shares (Hedged)

-4.3

6.6

-2.1

10.1

-3.7

2.1

3.6

International Shares (Unhedged)

-4.1

6.0

-0.5

2.4

-6.7

-1.2

-1.1

Private Equity

1.0

3.1

8.2

9.0

1.9

7.1

-

Australian Listed Property

8.6

16.4

11.0

12.2

-12.6

-3.8

1.7

Global Listed Property (Hedged)

4.0

16.5

8.3

26.8

-1.7

4.3

-

Australian Unlisted Property

1.9

4.4

9.6

7.8

4.7

8.4

9.5

Global Listed Infrastructure (Hedged)

1.8

4.9

5.0

10.3

-0.3

-

-

Unlisted Infrastructure

3.6

4.3

6.9

9.3

4.9

7.6

-

Australian Bonds

4.6

5.4

12.4

8.6

8.2

6.9

6.8

International Bonds (Hedged)

2.6

4.9

11.6

10.0

9.6

7.8

8.2

Hedge Funds

-1.8

2.2

-2.0

8.6

3.2

5.3

-

Cash

1.0

2.2

4.7

4.5

5.3

5.5

5.4

Source: Chant West

Table notes: The table contains gross investment returns, that is, investment returns before fees and taxes have been deducted. The asset classes and categories listed are the main asset sectors that super funds invest in. Chant West has used market indices for performance figures for all sectors other than private equity and unlisted infrastructure. For those two categories, Chant West has used the returns of a major super fund in the Chant West survey that is representative of those sectors.

The text and table set out below relate to the 2010/2011 year only.

Top performing asset classes for 2010/2011 year

The top-performing asset class for the 12 months to 30 June 2011 was Global Listed Property (hedged) with a majestic 12-month return of 32.5% before deducting fees and taxes, according to rating company Chant West. The second top-performing asset class for the 2010/2011 year was International shares (hedged) with a 12-month return of 22.3% before fees and taxes, but a mediocre 2.7% on an unhedged basis (the worst performer), due to the strength of the Australian dollar. Global Listed Infrastructure (hedged) came in third with a return of 17.1%, while Australian shares came in fifth with a return of 11.9%.

According to Chant West global Real Estate Investment Trusts (REITs), that is the official term for listed property investments, was the top performer for the second year in a row. Australian REITs returned a ho-hum 5.9% for the year, while Australian bonds returned 5.5% and international bonds (hedged) returned 6.9%.

Top performing asset classes for 10-year and 5-year periods to 30 June 2011

The top performers among the 13 asset classes (or sub-categories) are different when you look over a longer timeframe. For example, over a 10-year period to June 2011, Australian unlisted property outperformed all asset classes with an average annual return of 9.5%, followed by international bonds (hedged) with an annual return of 7.9%, and then Australian shares with an annual return of 7.2%.

Note: Figures over the 10-year and 7-year period to 30 June 2011 don’t include performance statistics for private equity, global listed property (hedged), global listed infrastructure (hedged) and unlisted infrastructure, due to the relatively recent development of these asset sub-categories.

Asset Sector Performance: Gross performance to June 2011

Asset Sector

3 Mths (%)

1 Yr (%)

3 Yrs (% pa)

5 Yrs (% pa)

7 Yrs (% pa)

10 Yrs (% pa)

Australian Shares

-4.3

11.9

0.3

2.4

8.4

7.2

International Shares (Hedged)

-0.5

22.3

0.0

0.5

3.7

1.6

International Shares (Unhedged)

-2.9

2.7

-3.3

-5.1

-1.2

-3.7

Private Equity

3.3

11.1

-0.1

4.2

-

-

Australian Listed Property

-0.5

5.9

-9.7

-10.3

-2.9

2.1

Global Listed Property (Hedged)

4.0

32.5

1.4

-0.8

-

-

Australian Unlisted Property

2.0

9.9

0.1

6.5

8.9

9.5

Global Listed Infrastructure (Hedged)

2.2

17.1

-2.0

4.3

-

-

Unlisted Infrastructure

3.3

12.8

2.4

7.2

-

-

Australian Bonds

2.3

5.5

8.1

6.5

6.2

6.2

International Bonds (Hedged)

2.9

6.9

9.4

8.4

7.8

7.9

Hedge Funds

-0.5

12.1

2.5

5.5

6.8

7.1

Cash

1.2

5.0

4.8

5.6

5.6

5.4

Source: Chant West

Table notes: The table contains gross investment returns, that is, investment returns before fees and taxes have been deducted. The asset classes and categories listed are the main asset sectors that super funds invest in. Chant West has used market indices for performance figures for all sectors other than private equity and unlisted infrastructure. For those two categories, Chant West has used the returns of a major super fund in the Chant West survey that is representative of those sectors.

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.


IMPORTANT: SuperGuide does not provide financial advice. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. Original Bob says:

    The number one asset class period for 2012 was in fact Silver, then Gold

    None of these assets held up against these

    They will continue to outperform any of these other classes listed in this article as long as central banks keep printing money – and they will not stop

  2. Alan Jefferson says:

    Just what the doctor ordered.

    Your Superanuation Guide is a slick but affirmative news letter. I have had all of my super in cash for the past 2 to 3 years, but the latest August 11 return seems to justify the decision to stay in Cash and possibly Australian Fixed interest.

    I feel a bit like a gambler at the local race meeting. Hedging appears to be the main weapon seems to be to hedge against the Ausie dollar.

  3. What is the reasoning for global listed property going from 1.5% on three year average to 32% in one year. Is this the currency hedge paying off. European and US property markets are in decline, where is this property being bought?

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