The average balanced Australian pension fund has had its worst financial year since 1988, returning only 5.4% according to the latest Mercer pooled fund survey.
The result is less than half the 13% achieved in 1990-2000 and well down on the double-digit returns that funds had become accustomed to over the last five years.
International equities markets were the biggest contributors to the performance downturn, returning –6% for the year to June 30 in Australian dollar terms.
Yet despite the overall low returns, Australian pension funds are expected to significantly outperform most of their international counterparts.
The relatively positive outcome is the result of two main factors, both largely accessible to Australian funds only.
Firstly, a weak Australian dollar throughout 2001 has buffeted the poor performance of international equity investments, the majority of which were made on an unhedged basis.
And secondly, Australian equities, a major asset class for Australian pension funds, were the star performers on the world share stage in 2000-2001, returning 9.1% for the year.
Early forecasts suggest the Australian share market will again be the standout performer in 2001-2001, returning approximately 9% in Australian dollar terms, compared to only 2% for international markets.
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