Australia Pension Funds Set for Second-Highest Return on Record

Australian pension funds are on track to post their best annual return in 16 years, powered by a global stock market rally, according to SuperRatings Pty Ltd.

Balanced funds in the A$1.5 trillion ($1.47 trillion) retirement savings system, the world’s fourth largest pension pool, posted a median return of 15 percent in the first ten months of the year to June 30, the Sydney-based data provider said in an e-mailed statement today. That puts the funds on track for the second-highest annual return since Australia’s compulsory pension system was introduced in 1992 and behind an 18 percent return in 1996 to 1997, it said.

Australia’s pension funds returned an annual negative 0.2 percent return in the five years to June 2012, SuperRatings data showed, roiled by contagion in Europe and a faltering U.S. recovery. Fueling the turnaround in funds’ returns, the MSCI ACWI Index of global equities, tracking emerging and developed markets, rose 21 percent since the end of June last year.

“It has been six long and challenging years, since the onset of the global financial crisis, for the superannuation industry and its members,” Jeff Bresnahan, founder of SuperRatings said in the statement. “However, a result of this magnitude, possibly some 14 percent-plus above prevailing inflation, could well be the catalyst for Australians to re-engage with their super funds.”

Commonwealth Bank of Australia’s Group Super-Mix 70, a fund for the employees of Australia’s largest bank, and Retail Employees Superannuation Trust’s Core Strategy pension fund topped the 5-year annual return rankings with a 5.4 percent and 5.2 percent return respectively. Balanced funds have as much as 76 percent invested in growth assets, SuperRatings said.

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