Fund returns are slipping as Australian stocks hit a losing streak

The world’s longest slide in New Zealand. Phil Walter/Getty Images

The Australian market, which closed last week down 1.3%, is dragging at returns from superannuation funds.

Shares are so far down 2.1% in May, as measured against the S&P ASX 200 index, making it the worst month since November last year.

This steady downward movement will further erode returns from superannuation funds.

In April, the median growth fund (61% to 80% in growth assets) lost 0.4% after Australian shares retreated 1.6%, giving up some of the gains made at the start of the year.

However, typical growth funds have a diversified spread of investments with an average allocation of about 50% to Australian shares, unhedged international shares and listed property.

All these sectors delivered negative returns in April but most funds are well diversified across a range of other growth and defensive assets.

Warren Chant, of analysts Chant West, says this helped reduce the impact of market falls and limited the loss to 0.4%.

“That keeps us on track for another positive financial year return, quite possibly in the double digits,” he says.

The typical growth fund returned 12.4% for the year to the end of April.

This table compares performance for each category of fund:

The one-, three- and five-year returns reflect a strong performance in listed shares and property. The more aggressive fund categories, which have a higher proportion invested in those assets, have produced the best performance.

The seven-year returns, while still weighed down by the GFC effect, are gradually improving as the GFC period continues to drop out of the calculation.

Analysts Superratings say the 0.4% fall in April was only the second negative return for the financial year. The other loss was for September 2014. Funds have produced positive returns in eight out of 10 months.

This chart summarises the monthly returns so far:

Superratings calculates the median balanced fund, so for this financial year, it sits at a healthy 10.6%. This time last year, the median return was 11.1% and went on to produce a full-year return of 12.7%.

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