Aussie Superannuation Funds Set to Achieve Double-Digit Growth

(February 22, 2011) — New research by Chant West shows the median growth superannuation fund gained 1% return in the month of January, bringing the total returns for the financial year-to-date up to 8.4% since July, 1 2010.

“The strong performance in overseas share markets during January was largely fueled by stronger than anticipated economic data in the US, together with some company profit results that exceeded expectations,” said director Warren Chant of Chant West, a superannuation research consultancy firm. “While sovereign debt issues are still an underlying concern in Europe, markets there have also had a strong start to the year.” Chant further indicated that in Australia investors have yet to see the full impact of the recent floods and cyclone on shorter term growth, inflation and interest rates. However, he said he doesn’t expect there to be a major impact on longer term growth.

For the financial year-to-date which started on July 1, 2010, the median growth fund is now expected to post gains of 10% or more in 2010-11, having grown 8.4% since July 1. In January, the median growth fund posted a 1% return.

The gain with Australian growth funds came from strong overseas share markets, with particular strength in the US, according to Chant West. As a result of the depreciating Australian dollar, international shares gained just 2% in hedged terms, compared with 5.3% in unhedged terms.

Chant West tracked about 60 growth funds, including many of the nation’s biggest industry superannuation funds and not-for-profit funds.

Earlier this month,AustralianSuper, Australias largest pension fund, agreed to merge with Westscheme to form a $40.2 billion fund with 1.7 million members.

This merger is all about putting members first,” Westscheme CEO, Howard Rosario, said in a statement. “Members will continue to receive locally based services and stand to gain significantly from low long-term costs, access to a wider range of benefits and products and strong long-term investment performance.

According to independent research group SuperRatings, about 50% of funds in the not-for-profit sector will consolidate over the next three to five years, spurred by the long-running Cooper Review of Australias retirement savings industry. The Cooper Review, chaired by Jeremy Cooper, is designed to overhaul the governance, efficiency, structure and operation of Australias Superannuation System. The review has called for fewer, larger funds to enhance stability, making it harder for small funds to compete, unless they find a larger partner.