Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Managed funds industry hits record high as super sector thrives
Australia’s managed fund industry hit a record $4.57 trillion in assets in the June quarter, as superannuation fund balances surged on the strong jobs market and a rising level of contributions.
The consolidated assets of managed funds institutions rose to $4.57 trillion through June 30 from $4.5 trillion in the March quarter, a rise of 1.6 per cent, according to the latest managed funds data from the Australian Bureau of Statistics (see chart).
A record amount was invested offshore during the quarter, with the amount of money managed by non-resident investment managers striking $1.79 trillion. Up from $1.73 trillion in the March quarter, the figure is catching up to $1.91 trillion invested with Australian fund managers, also a record high.
Super values jump on strong jobs market
The value of Australia’s superannuation pool rose $76.8 billion, or 2.2 per cent, to a record high of $3.62 trillion during the June quarter, the ABS data show. The value of superannuation funds jumped 9.4 per cent from a year earlier on rising asset values as share markets rebounded despite high inflation and rising interest rates, with most asset classes generating positive returns.
Rising rates also prompted cash deposits held by superannuation funds to hit a high of $278.1 billion, up 2.6 per cent from $271.1 billion in the March quarter. The value of offshore share investments held by super funds rose $47.4 billion, or 6.7 per cent, while domestic share investment rose 1 per cent during the June quarter.
Also supporting the burgeoning size of the nation’s super investment pool has been very strong jobs growth, with the unemployment rate at a near 50-year low, which pushed up super contributions. According to the Australian Prudential Regulatory Authority, super contributions jumped 12.9 per cent to $165.2 billion in the year ending June 2023. Employer contributions increased by 12.9 per cent over the year, to $122.5 billion, while member contributions increased by 13.1 per cent, to $42.7 billion.
Superannuation funds have been strongly boosted by share markets over the past three years, with domestic and international markets returning around 10 per cent per annum. Property returns have been mixed while cash has generated low but positive returns (see chart).
Over the past 10 years, international shares and Australian shares have produced the highest returns but with greater variability, followed by global listed property. Cash has delivered the lowest but most stable returns (see chart).
Super funds encountered a more challenging month in August, given the volatility in investment markets. Despite that, the median growth fund (with 61-80 per cent in growth assets) was still only down 0.1 per cent over the month. That means the return over the first two months of the current financial year stands at 1.4 per cent, according to Chant West.
ETF flows also strike high
The Australian exchange-traded fund (ETF) industry also struck a new all-time high in assets under management through August, benefitting from strong monthly inflows for the past year. In a departure from previous months, the top asset category for inflows in August was broad Australian equities ETFs, which at $1.1 billion represented 50 per cent of the total month inflows, according to Betashares.
“Fixed income exposures also continued to be popular with investors,” said Ilan Israelstam, Betashares’ chief commercial officer. Investor inflows in August were $2.2 billion, the company reported, the highest in a year. The ETF industry grew by 1.6 per cent from July to reach a total monthly market capitalisation of $156.1 billion. The sector has grown by 20.1 per cent, or $26.1 billion, over the last 12 months.
