High calendar year returns for super funds

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Super funds are on track to deliver the highest calendar year returns since the GFC, according to independent researcher SuperRatings.

The median superannuation balanced option recorded a 1.8% gain for October, bringing the return over the first four months of the 2013/14 financial year to 6.9%. The return over the 12 months to 31 October is now sitting at 16.9%.

Following on from a strong September, growth assets again performed well in October.

Australian equities were the key driver of returns, with the median superannuation Australian shares option returning 3.4%, compared to a 4.2% gain in the S&P/ASX 200 Accumulation Index, SuperRatings’ research showed.

Industry super funds outperformed retail superannuation funds, typically owned by banks, over all time periods – one, three, five, seven and 10 years – based on median returns.

Industry Super Australia chief Executive David Whiteley was happy at the results, saying  it provides further substantiation that industry funds continue to outperform retail super funds across all time periods.

“The combination of [the representative trustee] model, the strong investment in infrastructure by industry super funds, and a run only to benefit members philosophy is delivering better outcomes for industry super fund members."

Returns across all other asset classes remained positive in October, with property options gaining 1.7% for the month whilst diversified fixed interest and cash options were up 0.4% and 0.2% respectively. 

International shares are performing particularly strongly, with the median superannuation international shares option gaining 2.2% over the month.

This was despite the Australian dollar strengthening against major currencies in October – causing international investments to become less valuable in Australian dollar terms – including by 1.9% against the Greenback.

That international assets are doing well is no surprise to researchers at Investment Trends.

Based on a survey of 734 financial planners nationwide between July and August this year, its newest report reveals a growing trend away from cash and towards growth assets.

“Our research confirms that improved investor confidence and low interest rates have prompted planners to cut allocations to cash and direct more capital towards listed investments and other growth assets,” said Investment Trends senior analyst Recep Peker.

“Now an increasing proportion of that money is being invested offshore.”

Between 2012 and 2013, the allocation of new client investments to international assets jumped 5 percentage points to 31% of new client investments, the highest level since 2008. Much of that growth appears to have been driven by client demand, as well as planner recommendations.

“Our analysis shows that the proportion of sophisticated investors intending to increase versus decrease their exposure to international shares surged 15 percentage points between August 2012 and August 2013, from 3% to 18%,” said Peker.

“This suggests that the improving performance of overseas markets has seen a spike in investor interest over the last year.”

When asked which regions they wold encourage clients to invest in over the next 12 months, 40% of planners nominated the US or North America, up from just 10% in 2009.