- Investment performance for the financial year to date
- Long-term return of 8.2%, over 24.5 years
- Growth vs balanced investment performance
- Performance tables for 5 main investment options
- Diversified Fund Performance: Results to 31 March 2017
- Industry funds outperform retail funds over longer term
- Industry funds vs retail funds (Growth fund performance to 31 March 2017)
The median superannuation growth fund gained 1.5% in value during the month of March 2017, and has delivered 8.5% for the first 9 months of the 2016/2017 financial year, according to rating company, Chant West.
For the month of March 2017, Australian shares gained 4.7% in value. Over the same period, international shares (hedged) gained 5.4% in value while unhedged international shares only gained 0.9% for the month; due to the Australian dollar appreciating against the US dollar (up from US$0.72 to US$0.76) over the month of March 2017.
Note: The majority of international share investments held in super funds are unhedged. Briefly, when a super fund fully 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.
Listed property lost ground domestically and internationally for the month of March 2017, with Australian REITs (A-REITs) losing 0.1% in value, and international REITs losing 1.5% in value.
Investment performance for the financial year to date
Previously, Chant West has observed that although growth super funds delivered three straight positive returns [July 2.7%, August 0.3%, September 0.1%] for the start of the 2016/2017 financial year, the performance over the quarter was far from consistent. Of the 3.1% gain, 2.7% was achieved in July, and for August and September, the returns were fairly flat.
The returns for the month of October fell further, and dropped into the negative for all of the 5 main investment options, and the median growth superannuation fund lost 0.7% for October 2016. With a positive return of 1.1% for the November 2016 for the median superannuation growth fund, the median superannuation fund closed strongly for the calendar year (January to December) with a 2.3% gain in value for December 2016, delivering a 7.7% median return for the 12 months to December 2016.
Chant West director, Warren Chant, said the 0.1% loss in value for January 2017 did not come as a surprise after the unexpectedly strong performance for the 2016 calendar year. He does note however the political uncertainty in many regions overseas. For the month of February 2017, Chant said that the 1.2% gain in value for the median growth fund, and stronger investment markets indicated an eighth consecutive positive financial year return.
For investment performance for the month of March 2017 (and for the 9 months up to March), Chant reiterated the strong chance of a positive financial year return. He says, “Growth funds have performed better than expected this financial year… This is particularly impressive given the uncertain economic and political climate we’ve seen over the past few years.
“While global economic growth remains patchy, the picture is certainly better than it was 12 months ago. US economic data continues to show improvement, and the share market has responded with solid gains. Steady growth, strong job gains and confidence that inflation is moving towards its target of 2% prompted the Federal Reserve to raise the target overnight interest rate by 0.25% in March to a range of 0.75% to 1%. That was the second rate hike in three months, and suggests the Fed is confident that the economy is strong enough to cope with a slow return to more normal interest rates.
“In Europe, macroeconomic data released during the quarter was mainly positive but there remains some nervousness around political developments. While the Dutch election result helped to alleviate some fears about stability in the region, polls are still to be held in Germany, France and possibly Italy. And, just this week, British Prime Minister Theresa May’s surprise announcement of a snap election to be held in June has added to the uncertainty, with the Brexit negotiations again in focus.
“Closer to home, China’s economic growth continued to show signs of stabilising. However, US President Trump’s protectionist policies, if enacted, have the potential to set off a trade war that could be damaging. Back in Australia, the RBA kept interest rates on hold at 1.5%. However, while GDP growth remains stubbornly constrained a further stimulatory rate cut this year remains a possibility.”
Performance tables to 31 March 2017, for the 5 main investment options offered by super funds, are set out later in this article. Investment returns spanning up to 15 years are also listed in the table later in this article.
Long-term return of 8.2%, over 24.5 years
According to Chant West, since the introduction of compulsory 24.5 years ago, median growth funds have delivered an average annual return of 8.2% to the end of the 2016 calendar year (31 December 2016). With the long-term annual CPI (inflation) increasing by 2.5% a year, the long-term return after inflation is 5.7% a year, which is ahead of the typical return objective, to beat inflation by 3% or 4% a year.
Calendar year performance: Looking back at super fund returns, the median growth superannuation fund has a delivered a positive return for each of the past 5 calendar years, and according to SuperGuide calculations, translates into average annual return for that 5-year period of 10.4% (7.7% for 2016, 5.8% for 2015, 8.5% for 2014, 17.2% for 2013, and 12.8% for 2012).
Financial year performance: Although the discussion above relates to calendar year performance (January to December), it is worth referring to past financial year performance (July to June of the following year). The median growth superannuation fund has delivered a positive return for each of the past 7 financial years, and according to SuperGuide calculations, translates into average annual return of 8.76% (which Chant West has rounded up to 8.8%). Chant West has outlined the performance for median growth super funds for the past 7 financial years as follows:
- 3.0% for 2015/2016 year
- 9.8% for 2014/2015 year
- 12.8%, for 2013/2014 year
- 15.6%, for 2012/2013 year
- 0.5%, for 2011/2012 year
- 9.2%, for 2010/2011 year
- 10.4%, for 2009/2010 year
Reminder: A financial year runs from 1 July to 30 June of the following year. A calendar year runs from 1 January through to 31 December.
Based on previous comments made by Warren Chant of Chant West, and updating these comments with reported results since December 2011, growth funds have delivered 47 positive monthly returns out of 63 up to March 2017. The month of March 2017 resulted in a gain in value of 1.5% for the median growth fund.
See performance tables below (listing returns for 1 month, 3 months, financial year to date (FYTD), 1 year, 3 years, 5 years, 7 years, 10 years and 15 years) to 31 March 2017. The tables appear immediately after the explanation of a growth investment option, a balanced investment option, a default investment option, and a median fund.
Growth vs balanced investment performance
Background: Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets, such as shares and property. A return for a median fund 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 the majority of 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.
Note: 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.
Performance tables for 5 main investment options
The table below lists the performance figures for the five main asset allocations for: 1 month, 3 months, FYTD, 1 year, 3 years, 5 years, 7 years, 10 years, and 15 years to 31 March 2017.
Assessing 1-month returns: Over the 1 month period to 31 March 2017, all 5 main investment options gained in value, with the median All Growth investment option gaining 2.3% in value, High Growth option gaining 1.9% in value, and the Growth option gaining 1.5% in value. The median Balanced option gained 1.2% in value, and the Conservative option gained 0.7% in value.
Monitoring 3-month returns: For the 3 months to 31 March 2017, all 5 investment options gained in value: the top performer was the All Growth option with a 3.3% gain in value, followed by the High Growth option (2.9% gain in value), and then the Growth option which gained 2.5% in value over the same timeframe. The Balanced option gained 2.0% in value over the 3 months to March 2017, while the Conservative option gained 1.5% in value.
Financial year to date (FYTD): The median All Growth option (12.3%) outperformed all other investment options over 9 months to March 2017 (FYTD), which was then followed by High Growth option (10.4%), the Growth option (8.5%), and then the Balanced option (6.5%) and Conservative option (4.0%).
12-month return: The highest risk option, All Growth option (15.8%), outperformed all other investment options, followed by the High Growth option (13.5%), and then the Growth option, which gained 11.5% in value for the 12 months to March 2017. The median Balanced option gained 8.9% in value, while the Conservative option gained 5.3% in value for the 12 months to March 2017.
Performance over 3 years: The median All Growth option outperformed other investment options over 3 years to 31 March 2017 (9.2%), followed by the High Growth option (8.6%), and then the Growth option (7.9%). The Balanced option gained 6.6% in value over the 3 years to March 2017, and followed by the Conservative option (5.3%).
Performance over 5 years: The median All Growth option outperformed other investment options over 5 years to 31 March 2017 (11.6%), followed by the High Growth option (10.7%), the Growth option (9.6%), and then the Balanced option (7.7%), and the Conservative option (5.3%).
Performance over 7 years: The median All Growth fund (8.7%) slightly outperformed the High Growth option (8.6%), followed by the Growth option (7.9%), and then the Balanced option (6.8%), and the Conservative option (6.0%).
Performance over 10 years: Over 10 years to 31 March 2017 however, the All Growth option delivered the lowest return (4.6%) of the five asset allocations, with the Growth option (5.3%) slightly outperforming the High Growth option (5.2%), and the Balanced option (4.9%) and the Conservative option (4.9%).
Performance over 15 years: Over the 15-year period to 31 March 2017, the High Growth option (7.0%) slightly outperformed the Growth option (6.8%), and clearly outperformed the All Growth option (6.5%), the Balanced option (6.2%), and the Conservative option (5.8%).
According to previous commentary from Chant West, the performance figures for the 10-year period and 15-year are still weighed down by the ‘GFC effect’, although the returns are gradually improving. The 5-year and 7-year returns reflect the strong performance of listed shares and property, which means the investment options with a higher proportion of growth assets have performed better over these timeframes.
Diversified Fund Performance: Results to 31 March 2017
|Fund Category||Growth Assets (%)||1 mth (%)||3 mths (%)||FYTD (%)||1 Yr (%)||3 Yrs (% pa)||5 Yrs (% pa)||7 Yrs (% pa)||10 Yrs (% pa)||15 Yrs (% pa)|
|High Growth||81 – 100||1.9||2.9||10.4||13.5||8.6||10.7||8.6||5.2||7.0|
|Growth||61 – 80||1.5||2.5||8.5||11.5||7.9||9.6||7.9||5.3||6.8|
|Balanced||41 – 60||1.2||2.0||6.5||8.9||6.6||7.7||6.8||4.9||6.2|
|Conservative||21 – 40||0.7||1.5||4.0||6.2||5.3||6.2||6.0||4.9||5.8|
Note: Performance is shown net of investment fees and tax. It does not include administration fees or adviser commissions.
Source: Chant West 20 April 2017 media release (www.chantwest.com.au)
Industry funds outperform retail funds over longer term
According to Chant West, for the month of March 2017, the growth investment options for industry super funds and retail super funds both gained 1.5% in value.
Over the 9 months to 31 March 2017 (FYTD), industry funds (8.8%) outperformed retail super funds (8.3%).
For the 12 months to March 2017, industry super funds (11.9%) outperformed retail super funds (11.1%), which means industry funds delivered an extra 0.8% for the year compared with retail funds.
Over 3 years to March 2017, industry funds (8.3%) again outperformed retail funds (7.5%), and over 5 years to March 2017, industry funds (9.8%) repeated its outperformance delivering a greater return than retail funds (9.1%).
Over 7 years to 31 March 2017, industry super funds (8.3%) again outperformed retail super funds (7.4%). Over 10 years to the end of March 2017, industry funds (5.5%) finished the clean sweep outperforming retail funds (4.6%), according to Chant West.
Industry funds vs retail funds (Growth fund performance to 31 March 2017)
|Segment||1 mth (%)||3 mths (%)||FYTD (%)||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.
Source: Chant West 20 April 2017 media release