Shares and listed property help put super funds on track for best result in 16 years: Chant West

Superannuation funds are expected to deliver their strongest annual returns this financial year since 1996-97 with the recovery spurred on by the rising share market and a rebounded listed property trust (A-REITS) sector.

With two months to go in the 2012-13 financial year, the average balanced fund has returned 15.4% between July 1 2012 and April 30 2013, according to super research and consultancy firm Chant West.

Chant West estimates that returns rose to 17% as of last Friday with the 10-year-median return for balanced fund at 7.1%.

The fall in the Australian dollar since the RBA cut the cash rate to a 53-year-low of 2.75% on May 7 has also help drive up returns by increasing the value of unhedged international shares.

Shares and listed property were the stand-out performers over the March quarter.

Australian and global REITs rose 5.3% and 8.8% respectively as investors returning to riskier assets.

Atchison Consultants managing director Ken Atchison wrote on Property Observer that A-REIT total returns were "substantial" over the year to 31 March 2013.

"Listed property returned 30.7%, outperforming equities by 10.7%.

"Over three years listed property returned 11.7% p.a. Industrial property was the strongest performing sector over three years at 20.4% p.a, " he wrote.

In contrast bond markets have been more subdued with Australian and international bonds returning 0.2% and 1.2% respectively, reported Chant West.

The more aggressive fund categories – high growth and growth funds - which have a higher proportion invested in shares and listed property, have produced the best returns

“The strong share market rally has been driven largely by improved sentiment, with investors reacting optimistically to good news and looking past the current subdued growth rates, says Chant West director Warren Chant.

“Economic data out of the US was mainly positive over the quarter, and the Federal Reserve indicated that it’s in no hurry to end its quantitative easing and low interest rate policy.

“And although China’s most recently reported growth rate fell marginally short of expectations, there have been indications that its economy is now back on track.

“However, it wasn’t all smooth sailing as we were reminded that the Euro debt crisis still lingers, with concerns surrounding Cyprus’ debt woes and the political uncertainty in Italy,” he said.