Growth funds post second successive negative return

The median growth-orientated superannuation fund returned -1.5 per cent in April, according to an Intech survey, the lowest one-month result since the median fund returned -3.0 per cent in February 2003.

This result follows a -0.3 per cent return in March this year, the first time since February 2003 that the median growth fund has posted two successive negative monthly returns.

The two months’ results combined take the financial year-to-date return for growth funds to 7.9 per cent, down from a 10 per cent return for the year as of February.

Intech senior consultant Andrew Korbel said members were anticipating “a second bonanza year after the 13.9 per cent median return for 2003-04 but with the end of summer has come a change in sentiment.

“Now suddenly 2004-05 is shaping up to be a more normal year, with returns perhaps destined for mid-to-high single digits - in line with long-run expected average returns of 7-8 per cent per annum.

“In fact, given the way 2004’s market optimism has evaporated, some might consider such a return to be a good outcome from here.”

Korbel said softer economic news and concerns about corporate profit strength resulted in sharemarkets in Australia and overseas “falling over” in April.

Domestically, he said, the sharemarket was down 3.0 per cent during the month, with small caps and cyclical sectors faring poorly.

Internationally, Japan was the worst performed region (down 4.4 per cent in local terms) and Asia ex-Japan the best - down 0.9 per cent.

Other regions were down between 2 per cent and 3 per cent, for an overall return for hedged international shares of 2.3 per cent.

The Australian dollar appreciated against the US dollar and Euro, he said, slightly offset by falls against the yen, resulting in unhedged investors losing a further 0.8 per cent.

By contrast, longer Australian and US bond yields fell by around 0.3 per cent over the month, resulting in Australian and hedged international bonds going up 1.6 per cent and 1.5 per cent respectively.

Listed property trusts were again relatively weak during April, returning an almost flat 0.2 per cent, he said.