Less than super returns
Superannuation funds that allocated a higher percentage of their portfolios to Australian shares and direct property during 2007 faired better than others, a Mercer study has revealed.
However, the sub-prime crisis has meant that in most cases investors can expect lower returns from super in 2007, averaging 6 per cent compared to the previous year’s 14.5 per cent.
Describing the previous three years as “the perfect storm, where all major asset classes produced positive returns”, Mercer believes last year’s events put an end to this good fortune.
In its report on the 2007 super results, Mercer said listed property, previously one of the best performing asset classes, experienced the biggest fall, with the index dropping 8.4 per cent for the year.
Despite this decline, the Australian share market continued its strong performance, with energy and materials stocks producing impressive returns of 34.9 per cent and 44.7 per cent respectively.
Mercer determined that an investment of $10,000 in the Australian share market in January 2000 would now total $26,300, while the same investment in unhedged overseas shares would have lost the investor $1,000.
However, the report added that hedging some of a portfolio’s overseas share exposure would have been beneficial during 2007 with the Australian dollar appreciating against all the major currencies.
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