SuperRating's May super results
Highlights:
- The month of May 2007 - 1.75%
- Financial year to 31 May 2007 - 15.41%
- Rolling 1 year return to 31 May 2007 - 17.07%
- Rolling 3 year return to 31 May 2007 - 15.39% pa
- Rolling 5 year return to 31 May 2007 - 10.90% pa
- Rolling 7 year return to 31 May 2007 - 8.58% pa
- Rolling 10 year return to 31 May 2007 - 9.18% pa
International shares jumped 2.98% (net of tax and fees) during May to help Australia’s major
super funds post yet another strong month (+1.75%) in respect of returns to members.
With May’s positive return being the tenth positive month in a row the median financial year to date return for balanced options surged to an impressive 15.41% return.
This is now ahead of last year’s financial year return but June results to date have been slightly negative which brings an overall expectation for 2006/07 of around 15%.
Aside from International shares, super funds were assisted from strong gains in Australian Shares (+2.52%) and Property (+2.21%) during May. Interestingly, property has since suffered a significant setback during June which will impact on the final year’s result.
Looking at those funds that are showing strong performance this financial year brings even better news for members in this group, with one fund even breaking 20%. The top 10 funds to 31 May are:
Top 10 Super Returns for 11 Months ended 31 May 2007:
Balanced# Investment Options taken from SR50 Balanced Index
- Catholic Super Fund – Balanced 20.1%
- Telstra Super Corp Plus – Balanced 18.0%
- NGS Super - Diversified 17.5%
- Mercer Super Trust – Mercer Growth 16.8%
- Legg Mason – The Corporate Super MT – Balanced Trust 16.7%
- ASGARD Emp Super – SMA Balanced 16.7%
- Intrust Super – Balanced 16.6%
- JUST Super 16.5%
- AMP CS – AMP Balanced Growth 16.5%
- Buss(Q) – Balanced Growth 16.5%
- Top Quartile 16.2%
- SuperRatings’ Median Index 15.4%
- Bottom Quartile 14.9%
Commentary:
With strong returns from Australian shares, international shares and property in recent months, it is not surprising to see the strength in this year’s super results (15.0% estimated 2006/07). If the markets hold this week then the 2006/07 result will outpace already record-high performances of 2006, 2005 and 2004 (14.2%, 13.1% and 13.2% respectively).
According to SuperRatings Asset Allocation Benchmark as at 31 March 2007, the average super fund allocated 66.6% of its total investments into a combination of Australian shares, international shares and property.
High exposure to these sectors may contribute good returns in bull markets but on the other hand, amplify risk when markets turn around. Therefore, they expect to see conservative tactical asset allocation shifts in the near term (e.g. underweight in cyclical type assets and overweight in short to medium term securities) to pre-empt any turnaround in economic conditions.
Over the past year, the CPI has reduced to 2.4% p.a. and the December quarter even showed a deflation of -0.1% in Australia.
This underpins the monetary policy of the Reserve Bank and may ease concerns over an immediate rate rise until next year. What inflation data tells them is that members are enjoying high real returns from their investments in super but this now adds a new dimension and challenge for investors when considering their retirement strategy.
But are these levels of results sustainable? Recent economic data suggests that the world economy may have peaked in its cycle since recovering from the 2001/2002 low, thanks to strong demand for energy and resources from emerging markets, healthy investment and sustainable consumption.
However, concerns exist that a spike in bond yields may threaten borrowing costs for business and lead to pressure to tighten interest rates. This could be expected to affect the US economy given its continuing struggle in the sub-prime mortgage area.
Whatever the case, when markets continue to run as those of Australian equities and listed property have, funds that continue to get basic asset allocation decisions wrong quickly find themselves towards the bottom of performance measurements.
The interesting time will now be when markets turn which will then reveal the robustness of the overall portfolio construction.
The graph below (full chart is an attachment to this email) shows the strength of the markets over the last 36 months. In only 6 out of the last 36 months have there been negative returns and half of these have been minimal. Contrast this with 30 positive months (and 10 in a row since August 2006).
Results in respect of other major option types for the financial year to date have covered a wide range:
11 Month period 1 July 2006 to 31 May 2007:
- Growth Options SuperRatings Index - 17.3%
- Australian Share Options SuperRatings - 26.3 %
- International Share Options SuperRatings - 11.1%
- Property Options SuperRatings - 25.2 %
- Capital Stable Options SuperRatings - 9.0%
- Diversified Fixed Interest SuperRatings - 3.8%
- Cash Options SuperRatings - 4.9%
Other key results in respect of the rolling five year results to 31 May 2007 include:
- 5 Year Growth Option SuperRatings - 11.5 % p.a.
- 5 Year Australian Share Option SuperRatings - 17.0 % p.a.
- 5 Year International Share Option SuperRatings - 4.5 % p.a.
- 5 Year Property Option SuperRatings - 15.9% p.a.
- 5 Year Capital Stable Option SuperRatings - 7.5% p.a.
- 5 Year Diversified Fixed Interest SuperRatings - 5.9 % p.a.
- 5 Year Cash Option SuperRatings - 4.6 % p.a.
As can be seen from the above the choice of a particular investment option is critical to all Australians’ financial future. So aside from the challenge of choosing an appropriate fund
Australians are then faced with the choice of which option to choose within such a fund.
This probably explains why more than 4 out of every 5 Australians currently sit in their fund’s default option which in most cases is the Balanced option with some 70% of assets exposed to growth style assets with the remaining 30% in defensive style assets.
SuperRatings’ complete Fund Crediting Rate Survey covers over $280bn worth of superannuation assets and monitors fund returns to over 13m Australians through Australia’s major superannuation funds. The survey specifically excludes Pooled Superannuation Trusts (PST’s) as they are institutional based investment pools.
Additional return and database information:
They believe their database to be the largest in Australia dealing with multi-employer superannuation funds, where the great majority of Australians have their retirement benefits invested.
They now update their website monthly to show the top 5 performing funds together with the medians over all time periods for the following investment options:
Balanced
Growth
Australian Shares
International Shares
Capital Stable
Property
Cash
Fixed Interest
High Growth
Secure
Conservative Balanced
Simply go to SuperRatings website and click on Latest Investment Returns to view the various tables.
27-Jul-2007