Solid performance in the Australian equity market over the March quarter has supported superannuation fund returns, according to Chant West.
The research firm said the median growth super fund was up 2.5 per cent in the March quarter, bringing the cumulative returns for the first nine months of the financial year to a “healthy” 8.5 per cent.
“The March quarter return was driven mainly by strong share markets,” Chant West said.
“Australian shares advanced 4.7 per cent while international shares were up 5.4 per cent in hedged terms, but with the appreciation of the Australian dollar (up from US$0.72 to US$0.76 over the month), the return in unhedged terms was lower at 0.9 per cent.”
Chant West director Warren Chant said that while growth was “patchy” at a global level, “the picture is certainly better than it was 12 months ago”.
The economic fundamentals supporting these returns appear to be steady, but SuperRatings chair Jeff Bresnahan cautioned that reflation may be a little further off than initially expected.
“The rotation into equities has been a consistent theme since October last year, with yields moving off historic lows and shares pushing ever higher but we saw the market embracing duration again in late March, indicating that investors are questioning whether the reflation trade is sustainable,” Mr Bresnahan said.
“In short, the market is not convinced that shares will keep rising in perpetuity.”
Mr Bresnahan said the biggest threats to stable economic fundamentals are the “inter-related issues” of low wage growth and rising house prices.
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