The median superannuation growth fund gained 1.5% in value for the month of September, with shares and listed property being the star asset classes, according to rating company Chant West.
Global investors more confident, and willing to take risks
For the past 3 months to September 2012, the median superannuation growth fund gained 4.3% in value. Australian shares rose 8.7% for the same 3-month period, while international shares rose 5.5% (in hedged terms) and 5% (in unhedged terms).
Australian listed property (A-REITs) rose 6.7% while international REITs rose 4.0% in the 3-month period.
According to Chant West, investors demonstrated a greater appetite for risk by purchasing corporate bonds. Corporate bonds are backed by the businesses offering the bonds, rather than governments. Greater activity in the corporate bond market meant Australian bonds returned 2% for the quarter, and international bonds rose 2.9%.
Chant West director, Warren Chant, says: “The September result was the eighth positive month in the past nine, and it was driven by strong performances from assets at the ‘riskier’ end of the spectrum including shares, listed property and non-government bonds. Investors seem to be convinced that, despite a slowdown in the pace of growth, the global economy is making a reasonable recovery from the post-GFC slump and that better times lie ahead.
“During the quarter, there was relative calm in Europe and we saw further stimulus measures being announced by the European Central Bank. These were generally well received, as was the announcement by the US Federal Reserve of its programme for large and sustained purchases of bonds, with job creation being the top priority. There is also speculation of further policy measures in China designed to re-ignite growth there. So while there are still some lingering concerns, investors are focusing on the positives and some of the cash that built up in the crisis is flowing back into growth assets.”
Growth vs balanced investment performance
Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets such as shares and property. A median is simply choosing the return for the fund in the middle of the list.
Although the term ‘growth fund’ covers those super funds with investment options having a 61% to 80% allocation to growth assets, some super funds describe the identical asset allocation as a ‘balanced’ option. Chant West’s description of ‘balanced’ however is 41% to 60% in growth assets.
The balanced/growth asset allocation is the default option for most large super funds which means that at least 80% of all super fund members have their superannuation money invested via a growth or balanced investment option. If you don’t actively choose your investment options for your super account, then your retirement savings will be invested in the default option.
If you do actively choose your investment option/s then your super savings may be invested in another type of investment option such as conservative or high growth.
The table below lists the performance figures for the five main asset allocations for: 1 month, for 3 months (quarter), 1 year, 3 years, 5 years, 7 years, and 10 years, to 30 September 2012.
Note: The median conservative investment option has outperformed all other investment options over a 3-year, 5-year, and 7-year period. Over the 12-month period to September however, the median high growth fund (12.9%) outperformed all other super investment options. More significantly, over the 10- year period, the median growth investment option (6.2%) outperformed all other options. According to Chant West the performance figures for the 10-year period are slowly improving with the effects of the ‘tech wreck’ of 2000 to early 2003 working its way out of the figures. Over the shorter timeframes (1 month, quarter, 1 year), the higher risk investment options (with higher percentage in shares) outperformed the lower risk options.
|Diversified Fund Performance: Results to 30 September 2012|
|Fund Category||Growth Assets (%)||1 mnth (%)||Quarter (%)||1 Yr (%)||3 Yrs (% pa)||5 Yrs (% pa)||7 Yrs (% pa)||10 Yrs (% pa)|
|High Growth||81 – 100||1.7||5.4||12.9||4.7||-1.7||2.8||6.1|
|Growth||61 – 80||1.5||4.3||11.2||4.8||0.0||3.7||6.2|
|Balanced||41 – 60||1.2||3.5||9.9||5.4||1.9||4.1||5.9|
|Conservative||21 – 40||1.0||2.7||8.6||5.9||3.3||4.8||5.8|
Note: Performance is shown net of investment fees and tax. It does not include administration fees or adviser commissions. Negative returns appear as follows: -1.7% means a loss of 1.7%.
Source: Chant West 19 October 2012 media release (www.chantwest.com.au)
Industry funds outperform retail funds over longer term
According to Chant West, the growth investment options for master trusts outperformed similar investment options in industry super funds during the 3 months to 30 September 2012, returning 4.9% compared with 4.2% return from industry funds. The outperformance was due to master trusts/retail funds having higher weightings to shares and listed property (62%) compared with industry super funds (53%).
Note: Over 10 years to the end of September 2012, industry funds outperformed master trusts by 1.0% per annum, returning 6.8% against 5.8%, according to Chant West. Industry funds have also outperformed master trusts over 7 years, 5 years and 3 years. Master trusts outperformed industry funds over the 1-year period to 30 September 2012, returning 11.6%, compared with industry fund performance of 10.3%.
|Industry funds vs retail funds (Growth fund performance to 30 September 2012)|
|Segment||1 mnth (%)||Quarter(%)||1 Yr (%)||3 Yrs (% pa)||5 Yrs (% pa)||7 Yrs (% pa)||10 Yrs (% pa)|
Note: Performance is shown net of investment fees and tax. It does not include administration fees or adviser commissions. Negative returns appear as follows: -0.4% means a loss of 0.4%.
Source: Chant West 19 October 2012 media release