Funds notch 9.2% growth but still lag 2007 levels

The research company Chant West reported a gain of 9.2 per cent for the median growth fund over the past financial year, building on the 10.4 per cent gain in 2009-10. But a return of another 6 per cent is needed to fully restore the 27 per cent lost by the average fund between late 2007 and February 2009.

"Hopefully they will get back to their pre-GFC levels this year," Chant West's investment research manager, Mano Mohankumar, said. "If growth funds have a typical strategy and hit their 7 per cent target, they'll be back where they were with a little to spare."

He said growth funds had been on track to report double-digit returns this year, but weak sharemarkets in the June quarter knocked returns back. They still grew by more than the long-term average, thanks to strong returns from shares earlier in the year, and growth in unlisted investments such as infrastructure, private equity and property.

Mr Mohankumar said international shares also did well, though the rising Australian dollar meant most funds did not enjoy the full extent of the gains. While international shares returned 22.3 per cent, a fund that was unhedged against currency movements would be up just 2.7 per cent.

However, most super funds are partially hedged and would have reported gains of about 12 per cent.

Chant West's figures look at funds with between 61 per cent and 80 per cent of their assets in growth investments such as shares and property. Mr Mohankumar said most Australian super fund members were in this category.

He said industry funds provided a slightly better average return than retail master funds (9.5 per cent versus 9 per cent) and have outperformed by 1.3 per cent a year over the past 10 years, due to their greater willingness to use unlisted investments and change their mix of assets.

The importance of comparing returns was evident in the gap between the top and bottom growth funds. Last year, the best fund almost doubled the performance of the worst - 12.5 per cent versus 6.6 per cent - while over 10 years, the top fund returned 6.8 per cent compared with 3.6 per cent for the worst.