Growth funds claw back lost returns
Growth managers have come back to form after returning 11.5 per cent for the 11 months ending May turning around the negative returns of the previous two years.
In numbers released by InTech, the research group states that growth orientated superannuation funds need to post only one more month of strong returns to register the best year on record since the bursting of the technology bubble in March 2000.
For May the median return was 1.6 per cent with a drop in the Australian dollar providing a boost given that many growth funds had an unhedged exposure to international shares for part of that asset allocation.
However local markets also provided some stimulus with the ASX 200 rising nearly two per cent off the back of the resources sector while listed property trusts, typically around 8 per cent of a growth fund’s investments, climbed nearly 6 per cent.
Australian bonds also returned to form with performance rising 0.9 per cent, recouping the lost ground it made by the same margin last month.
Intech portfolio manager Chris Thompson says while the focus at the end of the financial year is on one year numbers it is worth examining the returns of growth oriented superannuation fund over longer periods.
He says these fund usually try to beat inflation by set margins over longer periods, usually seven years while reducing the chance of negative returns in single years.
“To be able to achieve these returns, managers invest a large part of their funds in shares. Unfortunately, this leaves the funds open to short-term reversals in performance like those experienced in the last two financial years,” Thompson says.
However Intech data shows that over rolling seven-year returns the median superannuation fund has met investment objectives returning from six to 12 per cent since June 1994 while CPI has moved within a two to four per cent band.
AUTHOR
Jason Spits
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