Brace for lower returns says InTech

Superannuation fund members have been cautioned against expecting returns to match those of the last few years.

InTech Investment Consultants has used the results of the latest Intech Super Survey to point to a deceleration in overall fund returns reflecting a more subdued contribution from share markets and a negative contribution from property markets.

InTech’s head of research, Hugh Dougherty said that financial markets rarely moved in a straight upward line for extended periods and that it seemed likely Australian superannuation funds were entering a period of more subdued investment return outcomes.

“Indeed, it would appear that the March 2005 quarter market a subtle shift in the drivers of investment returns with ‘risk’ assets (emerging markets, corporate bonds and small caps) tending to underperform the ‘higher quality’ assets during the quarter,” Dougherty said.

Looking over the horizon to the end of the financial year, Dougherty said that the strong returns recorded by superannuation funds over previous quarters meant many would deliver investment returns which were slightly above the reasonable long-term expectations for member.

He said that the in the nine months to March, the median fund in the growth-oriented universe of the InTech Super Survey had returned 9.4 per cent, implying that the final quarter of the financial year would have to record a large negative outcome to drag the investment return for the year to a number which is substantially lower than the annual run rate.

According to the InTech data the median return over the quarter for the 35 superannuation funds in the High Growth Universe was 1.1 per cent with MTAA Growth (3.4 per cent) MTAA Balanced (2.8 per cent) and ESI Super Growth (2.4 per cent) producing the highest returns.

The median return over the quarter for the 20 funds in the Balanced Universe was 1.1 per cent with MTAA Conservative (2 per cent) ESI Super Capital Management (1.9 per cent) and ING Balanced (1.7 per cent) delivering the highest outcomes.

The median return over the quarter of the 48 superannuation funds in the conservative universe was 0.9 per cent with ESI Super Capital Stable (1.8 per cent) Q Super Cash Plus (1.6 per cent) and CARE Capital Stable (1.4 per cent) recording the best returns.