Strong $A wipes gloss off super (provident fund) returns

五月 24, 2011
Joe Chan

Superannuation default fund returns are running below 10 per cent for the year after the record-breaking Australian dollar wiped 13.8 per cent off returns for international shares.

Default funds are used by 80 per cent of Australians.

They are funds nominated by employers to receive super guarantee contributions if employees do not exercise choice by selecting their own super funds.

Research firm Chant West said the median return for its growth funds, equivalent to default funds across the industry, touched 10.2 per cent by April 30.

Since then the local share market has dropped 4.1 per cent and offshore markets have declined also, making the prospect of double-digit returns during 2010/11 unlikely, senior investment analyst Mano Mohankumar said.

“We’re confident it’s going to be a positive return. Members can view it as a year of consolidation after last year’s positive return.”

The average growth fund still needs to grow another 4.5 per cent to drive returns back to pre-global financial crisis levels, he added.

The negative impact of a strong Australian dollar will make that highly unlikely for default funds, which typically have 25 per cent of their assets invested in international shares.

Despite 29 per cent of those global assets being hedged, the soaring local currency caused international shares to post a 13.8 per cent loss for the 10 months to April 30 on an after-tax basis, Mr Mohankumar said.

Other global assets are fully hedged such as property, infrastructure and bonds.

The Australian dollar hit parity with the US dollar last November and has traded consistently above that level since March.

Chant West’s growth funds have between 61 and 80 per cent of their assets in growth assets, which Mr Mohankumar said was equivalent to most default funds.

The firm’s balanced funds have 41 to 60 per cent of their assets invested in growth assets, and around 17.5 per cent are invested in international shares and 29 per cent of those hedged.

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