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The “dreadful” returns that many super fund members experienced in 2008 were in line with expectations, according to researcher Chant West .
Principal Warren Chant said the “reality is that, measured over an appropriate period, returns have been pretty much been in line with what they (investors) should have expected”.
The returns were “within the realms of expectations. The problem is that most people’s expectations had become too optimistic.”
In terms of risk, Chant said the “typical expectation” is for a negative return to occur once every six years on average. “So again, the experience has been broadly in line with expectations.”
He said the average growth fund, with 70 per cent of its investments in growth assets (mainly shares), lost 22.2 per cent during last year (before fees and tax), whereas over the previous four years it had grown by 66.5 per cent.
“When we look back over the full five years the average return was 5.3 per cent per annum, compared with an average increase in the inflation rate, as measured by the [consumer price index], of 3.1 per cent per annum.”
The typical return target for these funds is to outpace inflation by 4 per cent (before fees and tax) over rolling periods of five years, he said.
“So, on that score they failed to meet their target (2.2 per cent achieved versus 4 per cent targeted).”
