January respite for super funds

Sally Patten

Superannuation fund members received some respite from tumbling sharemarkets last month with the average balanced fund recording a 2.5 per cent gain in January.

It was the funds’ best performance since October last year and wiped out the 1.9 per cent loss suffered in calendar 2011, research firm Chant West said. The improvement was attributed to rising equity prices as investors took comfort that Europe may yet be able to fix its sovereign debt woes and the United States economy would recover. The S&P/ASX surged 5.1 per cent in January, while the S&P 500 in the US added 4.5 per cent.

“The strong sharemarket performance in January was on the back of positive economic data coming out of the US, which indicated that the US economy is showing signs of strengthening,” said Chant West director ­Warren Chant.

“Although the debt problems persist in Europe, there are signs that the recession in the region may end up being relatively mild,” he said.

January’s strong performance means the average loss being nursed by balanced funds since July last year is just 1.5 per cent, analysis by SuperRatings, another research house, shows. Last month’s rise would have been even higher but for the increase in the value of the Australian dollar, which meant that funds failed to benefit fully from the surge in offshore ­markets, argued SuperRatings managing director Jeff Bresnahan.

Peter Lambert, chief executive of the $6 billion Local Government Super scheme, which manages the retirement savings of more than 100,000 local government employees across NSW, said last month’s positive result was welcome. But he warned that it was no cause for celebration. Mr Lambert said he expected markets to remain volatile for the next six months while investors continued to focus on Europe’s sovereign debt pile.

“Until there is certainty over Greece and Spain, the volatility will continue. I reckon it will be a rocky time for the next six months,” said Mr Lambert. He said shares were undervalued but argued this was all too often overridden by negative sentiment associated with the aftermath of the global financial crisis.

David Elia, chief executive of HOSTPLUS, which manages $9 billion of super assets, said the January rise in sharemarkets vindicated his scheme’s strategy of maintaining its exposure to equities and not putting more money into cash investments.

Mr Elia argued that although the current volatility meant that now was not the time to “take big bets”, the long- term outlook for investment ­markets was bright.

Europe, he said, was becoming less important to the global economy, while the Asia and emerging markets would become increasingly vital economic drivers.

HOSTPLUS’s balanced portfolio has lost 0.45 per cent of its value since July last year.

The recent rise in share prices means that retail superannuation funds, which are largely owned by the big banks and wealth companies and tend to have a large exposure to listed assets, outperformed not-for-profit schemes in January.

The average retail fund balanced portfolio added 2.9 per cent last month, against 2.3 per cent for the average not-for-profit vehicle.

The best performing fund in the year to January 31 was QSuper, with a 4.2 per cent gain, according to Chant West. The Brisbane-based scheme was followed in the league table by Health Super, Recruitment Super and OSF, the staff fund for Commonwealth Bank of Australia employees.

The Australian Financial Review