Growth-orientated superannuation funds look set to deliver consecutive negative financial year returns for the first time in three decades according toInTech.
The research group estimates the median growth fund in the InTech Growth Fund survey will return -2.4 per cent for the financial year ending June 30, 2003.
Executive director Brett Elvish says that while this figure is an improvement on the -4.1 per cent experienced last financial year it becomes part of the worst two-year period ever recorded for super investors.
However, Elvish says investors should not become to despondent as markets do recover quickly, as evidenced over the last three months in which superannuation funds have returned 6 per cent.
He says investors with a long-term horizon – the majority of super fund members – should stick to their strategy and weather these inevitable negative years rather than attempt to second-guess markets.
InTech asserts that over the last three years, the median return for growth-oriented funds is around 0 per cent per year, so after inflation, investors have actually lost 13 per cent.
However, longer-term returns still remain strong.
A growth-oriented fund’s objective is to deliver a real return of 2 to 4 per cent over the long-term, and the returns over the last seven and 10 years are above this target.
Elvish says while the median return to the end of February was -7.6 per cent and international uncertainty resulted in some investors considering a move to cash, this strategy would have locked in a much worse return.
Property and bonds proved to be the top performers over the year. Listed Property Trusts defensive focus coupled with a spate of corporate take-overs in 2003, made them the best performing asset class with a 12 per cent return.
The Australian Bonds sector returned 10 per cent, with Australian 10-year bond yields falling from 6 to 5 per cent.
InTech says the better-performing funds this year are likely to have been underweight shares, overweight property and/or bonds, and to a lesser extent cash.
