There are probably few better ways to quickly put the recent sharemarket market volatility into perspective than to look at the medium to long-term returns of the large super funds with balanced portfolios.
Super fund researcher SuperRatings has just released its latest fund performance fund performance survey, covering returns to the end of a rocky January for the sharemarket – a degree of volatility that was to gather pace in February.
Just to recap: the S&P/ASX 200 Accumulation Index, which includes dividends, fell 5.5 per cent in January while the MSCI World Ex-Australia Net Total Return Index was down 5.9 per cent for the month.
By contrast, the median large super fund with a balanced portfolio recorded a 2.1 per cent negative return for January. While this provides an interesting, very short-term snapshot of how the broadly-diversified portfolios of these funds dealt with a period of high volatility, the real story is how the funds have coped over the medium to long term.
Keep in mind that the median balanced fund – defined by SuperRatings as a fund with 60-70 per cent of its portfolio in growth assets – has experienced four negative returns during the financial year up to January (excluding February). It’s been a testing time.
Fortunately, the benefits of spreading risks and opportunities with a widely-diversified portfolio are clear by looking further back at past returns.
The median balanced super fund produced annualised rolling returns to January 31 of: one-year return, 1.4 per cent; three years, 8.3 per cent p.a.; five years, 7.5 per cent p.a.; seven years, 8.2 per cent p.a.; and 10 years, 5.3 per cent p.a.
Significantly, the seven and 10-year rolling returns include the impact of the GFC. (The Australian sharemarket hit its GFC low point almost seven years ago.)
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Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment. |
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