Andrew from Vista Financial

Superannuation Investment Returns June 2013

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    Here are the latest published superannuation results for the Growth Multi-Asset sector.

     

    These figures have been taken up to the end of June 2013 and again the performance gap is extremely wide.

     

    The figures are based on Pre-mixed Growth Funds which typically consist of 60%-80% in growth assets e.g shares and 20%-40% in defensive assets e.g bonds.

     

    This is where most superannuation members monies will be invested, certainly those that have not made a pro-active choice.

     

     

    Results

     

     

    Latest 12 months performance:

     

    Best = 27.02%

     

     

    Worst = 7.28%

     

     

    That's nearly $20,000 difference in a year on a $100,000 super balance!!!!!

     

    Last 5 years performance:

     

     

    Best = 7.54% per annum

     

     

    Worst = 0.30% per annum

     

     

     

    This again shows how important it is to regularly review your Superannuation Fund's performance and investment options to ensure that you are investing according to your risk tolerance and ensure your fund manager is performing consistently.

     

     

     

     

    Past performance is not a guide to future performance.

     

    The figures have been taken from Morningstar and include Super Funds from the Retail, Corporate and Industry sectors.

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    Hi Andrew,

     

    As currently UK based I assume without a huge amount of knowledge that the Super funds are simply invested by fund managers. To achieve such huge variations, am I right that many of the funds invested in must be high risk as our UK investments fluctuate between 5-7% at best. What sort of protection is provided against poor investments or is it the investor who instructs the fund manager to their willingness towards risk? Also are the funds mostly invested in domestic markets or global investments?

     

    Many thanks, slowly learning and building up confidence to transfer all investments when we make the move.

     

    Simon

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    Hi Simon

     

    You are right in that the figures shown are for a multi-asset investment option within a Super Fund and in this instance this is the growth category 60%-80% growth assets (shares, property, infrastructure etc) and 20%-40% defensive assets (cash, fixed interest etc).

     

    These investment funds do have fund managers that make the investment decisions so yes in general the performance differential is due to the decisions that these managers have made.

     

    I don’t think that Australian Managers are outperforming UK Managers as the longer term performance is probably around the 6%–8% within this category however last year the investment returns were exceptionally high and this would not have just been in Australia, International Markets also made strong returns.

     

    The growth category is actually where most peoples Superannuation monies are invested as most do not make a choice and therefore the monies are invested in the default option when they join a scheme and that option generally has the 60/80 – 20/40 growth/defensive allocation.

     

    That said I think that Australian do tend to have a bit more of an assertive approach to towards shares/investments than the Brits as they tend to be more conservative.

     

    The thing to ensure when comparing performance is to try and compare on a like for like basis as there can be quite a bit of difference between fund managers allocation even within the same category and this is also a reason for the performance differential.

     

    Last year for example was a great year for shares and property funds so a fund manager that had an allocation of 80% to these assets against a fund manager that had only 60% would have achieved greater performance but of course in the GFC the opposite would be the case.

     

    Generally there is no protection against poor performance however there are products whereby a protection option can be purchased although I am not keen on these types of products for long term investments as generally the markets do always recover and go up over the longer term.

     

    I do think though that it is important to regularly review the performance of a fund manager and the reasons behind why they may be underperforming. Usually it is possible for investors to choose where to invest THEIR money.

     

    Super Funds can be very sophisticated nowadays and it is possible to create portfolios rather than using just one multi-asset investment fund option. Some Super Funds known as Platforms or Wraps offer the ability to invest across a range of managed funds (active, indexed, hedge funds etc) purchase direct shares, and also invest into Exchange Traded Products which invest across shares, property, currency, commodities etc.

     

    How Super Funds are invested in relation to domestic or global markets will depend on the fund manager’s decision, one may have say 24% towards international and another say 34% of this one may be unhedged and one fully hedged so the effect on the overall result of the fund could be very different.

     

    With people that are utilising Platforms or Wraps and making their own investment decisions or using an Adviser the exposure towards international and domestic can be specified as well as the currency hedging if there is a strong view. Currently my tailored portfolios are generally unhedged against Aussie Dollar for international assets.

     

    Hope this helps Simon :smile:

     

     

    Regards

     

     

    Andy

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