AUSTRALIA - The median superannuation growth fund returned a nearly flat 0.2% for April, dragged down by mixed results in investment markets and the continued strength of the Australian dollar, according to research from consultancy Chant West.
The cumulative return for the financial year to date for the median growth fund - defined as having 61% to 80% growth assets - was 10.2%. The Australian share market was down 0.3% for the month, while international shares returned 2.5% in hedged terms. But due to the continuing appreciation of the Australian dollar, this return was reduced to a loss of 1.4% in unhedged terms. Property securities were up, with Australian and global REITs advancing 0.3% and 4.4%, respectively.
Chant West director, Warren Chant, said: "Our dollar appreciated against all major currencies over the financial year to date, including a 30% rise against the US dollar (from US$0.85 to US$1.10). Unless you hedged against that currency movement, it took a big chunk out of the value of your overseas investment returns. We estimate that currency detracted about 3.5% from the typical growth fund return over the financial year to date with the better performing funds being those that hedged more against the rising Australian dollar."
Chant noted that the majority of Australian superannuation funds have a partial hedging strategy, with around 70% of funds in the Chant West survey hedging between 20% and 50% of their international shares exposure with the average hedge ratio being 29%.
"So some - but not all - of the currency risk is removed from their international share investments," Chant noted. "Of course funds hold other international assets apart from shares, such as property, bonds and infrastructure, but typically these investments are fully hedged."
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