The average median balanced option in Australia’s largest super funds has recorded a dip in January, falling 2.17% as sharemarkets headed south.
But fund members will be cheered by the fact funds have returned 12% for the 12 months ending January 2010 after a loss of 20% just one year ago, according to new figures from ratings firm SuperRatings.
SuperRatings says that over a five year period, a $300,000 investment in the top fund would deliver a balance today of $406,798, with the same investment in the worst fund providing a balance of just $314,523.
Over the month of January, funds have dipped 2.17%, but over the financial year to January 31 funds have actually increased by 9.78%. The 10-year rolling return has delivered a performance of 5.28%.
SuperRatings managing director Jeff Bresnahan has said in a statement that five and seven year options are providing a better guide of a fund’s performance.
“The reality is that a typical “balanced” investment option will hold around 70% of its assets in Australian shares, international shares, property, private equity and infrastructure, all typically volatile type assets which can and will result in short-term losses from time to time. So, when markets tank, as they have in 2008 and early 2009, short-term performance numbers start to move right away from their longer term counterparts.”
“Typically a five year balanced option performance number would not be expected at any time to move into negative territory, unlike the one year number which bounces around with the markets. So when determining whether a super fund has delivered value or not, consumers can effectively ignore the 12 month number while focusing predominately on the five or seven year numbers.”
Shares higher after Wall Street rally
Meanwhile, the Australian sharemarket has opened higher today after a strong Wall Street session, bolstered by comments from Fed chairman Ben Bernanke regarding the state of the economy and the intention to keep interest rates low for some time.
The benchmark S&P/ASX200 index was up 21 points or 0.46% to 4669.9 at 12.00 AEST, while the Australian dollar continued to fall due to worries over the Greek economy, dropping to US89c.
Commonwealth Bank shares have decreased by 0.2% to $53.90, while NAB rose 2% to $25.10. Westpac gained 0.6% to $25.92 as ANZ lost 0.5% to $22.41.
Lend Lease announced a 134.4% rise in net profit for the six months to December 31 to $204.9 million, with revenue decreasing 28.6% to $5.59 billion. The company expects full year operating profit to be around the same level as last year’s $307.5 million.
“We remain confident of the group’s outlook over the long-term,” chief executive and managing director Steve McCann said in a statement. “The group has demonstrated a capacity to perform well in the face of extraordinary global conditions.”
“Market conditions for our construction business in the US and Europe remain very difficult and our earnings have been impacted by the strong Australian dollar.”
Insurance Australia Group has announced a net profit after tax of $329 million for the first half of the current financial year, up by $4 million from the previous corresponding period. Insurance profit rose to $488 million, a 13.4% increase.
“Our significantly improved first half insurance profit demonstrates that actions we’ve taken over the past 18 months have delivered tangible results, with over half of the expansion in insurance margin derived from operational improvements,” managing director and chief executive Mike Wilkins said in a statement.
Flight Center profit up 95%, Bernanke addresses Congress
Flight Centre has recorded a $51.1 million net profit for the six months ending December 31, representing a massive 95.8% increase from the previous corresponding period, with revenue up 6.9% to $818.5 million.
The company said it was able to achieve this result even through harsh market conditions, low yields and declining airfares.
“Looking ahead, the company sees continued growth and improvement opportunities, particularly in corporate and wholesale travel and in niche areas of the leisure market,” it said in a statement to the ASX.
Overseas, Fed chairman Ben Bernanke told Congress the current weak job market and low levels of inflation will see interest rates remain low “for an extended period”.
“Notwithstanding the positive signs, the job market remains quite weak,” Bernanke told the US House of Representatives Financial Services Committee.
“The FOMC continues to anticipate that economic conditions – including low rates of resource utilisation, subdued inflation trends, and stable inflation expectations – are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Stocks rose as a result, with investors now confident of monetary policy remaining in expansionary territory for some time. The Dow Jones Industrial Average gained 91.75 points or 0.89% to 10,374.16.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
