The average balanced super fund delivered an 11.7 per cent return in the 2012 calendar year.
This was the first double-digit return in a calendar year since 2009 and was largely driven by a resurgence in global equity markets, particularly in the second half of last year.
This is because the typical balanced fund, in which most Australians have retirement savings, has half its money invested in local and overseas-listed shares.
As SuperRatings founder Jeff Bresnahan points out, it goes to show how reliant the average super fund is on the sharemarket.
“When one considers that funds were sitting on a return of only 3.7 per cent at the end of May, the 8 per cent return over the following seven months shows the benefits to members of rallying equity markets,” Bresnahan says.
According to figures from rating company SuperRatings, the global rally last year helped increase the average amount of money held in local balanced funds to $183,527.
The pre-financial crisis peak for funds was $177,529.
This means the typical fund now has close to $6000 more than the average amount held before the GFC, an increase of 3.4 per cent.
Looking at it from a different angle, funds have rebounded by 37.9 per cent since the bottom of the market cycle in February 2009.
According to Bresnahan, the standout performers over five and seven years have been conservative options such as capital stable, fixed interest and cash, driven by a global surge for fixed-interest investments.
The fixed-interest boom has pushed yields to record lows, and Bresnahan wonders how long conservative options will remain attractive.
“Members should be wary … that at such low interest rates, it is becoming increasingly difficult for retirees and other conservative investors to generate a reasonable rate of income,” he says.
It will be interesting to see how investors respond to last week’s announcement of the Bank of Japan’s huge open-ended monetary easing policy, designed to end two decades of deflation.
Will they remain conservative over the next 12 months, or will they choose to go for a little more growth?
The original release of this article first appeared on the website of Hangzhou Night Net.