A month is a long time in the market

Robin Bowerman, Head of Retail at Vanguard Investments Australia.
Robin Bowerman, Head of Retail at Vanguard Investments Australia.

THE past month has been a long time for world investment markets and this is being reflected in the expected annual returns for Australian super funds.

Only a month ago, leading super fund researchers – managing director of SuperRatings Jeff Bresnahan and principal of Chant West Warren Chant – were saying that funds with balanced portfolios were on track to record double-digit median returns for 2009-10. This followed two years of negative annual returns.

Bresnahan noted at the time: “Assuming the trend (of monthly fund returns to date) continues, this would lead to an unprecedented five double-digit returns within the last seven years, and would be a substantial turnaround from the losses members suffered just 12 months ago.”

But after the sovereign debt concerns in Europe triggered the sharp fall in global share prices during May, forecasts for the 2009-10 returns of Australian super funds have understandably become much more subdued.

Chant West and SuperRatings still foresee the first positive returns since 2006-07 but whether median returns are in the double-digits has become highly uncertain.

Fortunately, the vast majority of Australian fund members didn’t panic during the GFC crisis – resisting any urge to switch from balanced into all-cash portfolios after the market had heavily fallen.

It can be expected that fund members will deal with the prevailing difficulties in the same responsible manner.

Whenever investors panic and allow their emotions to dominate their investment behaviour, they usually ignore the positives and overly focus on the negatives. And there have been plenty of economic and market positives with the recovery from depths of the GFC.

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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.

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