(June 23, 2010)

DEVASTATING losses on global markets mean superannuation balances are continuing to shrink, with data from Chant West pointing to a 2.6 per cent loss by median growth funds in May.

But industry funds have maintained a fairly consistent performance advantage over master trusts.

Over 10 years, the not-for-profits remain ahead by 1.3 per cent a year, returning 5.8 per cent versus 4.5 per cent for the retail sector.

In May, the Australian share market lost 7.5 per cent for the month, with the global unease compounded by concerns about the Government's proposed tax on mining profits.

The losses would have been even worse were it not for the Aussie dollar's sharp decline and the broad diversification of most fund portfolios.

Chant West principal Warren Chant said May was one of those months when investors saw the benefits of diversification at work.

"Share markets fell more than 7 per cent, but even the more aggressive growth funds don't commit all their money to shares. The broad spread of investments they have in their portfolios limited the damage to 2.6 per cent on average which, while disappointing, was not a disaster.

"Share markets did fall an uncomfortably long way in May, but a correction of that magnitude was always possible at some stage given the serious nature of the euro debt problems.

"Investors around the world are fearful of what might happen in global credit markets if the bailout measures turn out to be inadequate, and what the flow-on effects may be for the global economic recovery."

Mr Chant said super fund members have no need to be despondent, as growth funds were still up a healthy 11.7 per cent for the financial year to date, and members can still look forward to the first positive financial year return since 2006-07. "We estimate that the return to the end of June will be about 12.5 per cent after investment fees and tax, which is well above the long-term expected return of 7-8 per cent a year for growth funds."

International shares fell 7.6 per cent in local currency terms in May, as investors' fears rose about the fallout from the euro debt crisis.

（Source: news.com.au）