13 June 2012

In a sobering report form the Organisation of Economic Co-operation and Development (OECD), Australian pension (superannuation) funds are among the world’s worst performers for the 4 year period since end of 2007.  The OECD’s review of global pension funds also also highlights the unusually high concentration of equities that are  held by Australian suoeranuation funds. As reported in an article in today’s Australian newspaper, Australian superannuation funds “have lost a greater share of their members funds since the global financial crisis than any other pension system in the advanced world, with the exception of Iceland.”

The report discloses that Australian superannuation funds (taken as a whole) have a 47% weighting in equities and only a 25% allocation to  fixed interest securities. This contrasts sharply with a country such as Denmark where its superannuation funds have only a 15% exposure to equities and a 69% allocation to fixed interest. Clearly equities have been hit very hard since 2007 however, when the relative performance of the two countries’ pension fund industries is taken over the past 10 years, Australian funds have averaged a positive return of 2.5% versus 4% by Danish funds.

At Whites IFM we consistently advocate that superannuation clients consider a substantial allocation to the fixed interest sector – the exact allocation naturally depends on each client’s personal circumstances. For more information on preferred asset allocation strategies, please contact us by phone, email or via the “Enquiries” section on our Home page.