Super funds should be wary

Published in Geelong Advertiser, March 2010 by Dale Gillham

Australian banks are still struggling with the cost and availability of funds from overseas following the global financial crisis.

The challenge they face is the need to fund billions of dollars in infrastructure projects over the next decade, therefore they have been looking for other avenues of funding and it seems they have our superannuation money firmly in their sights.

Currently super funds can already allocate a small percentage of our retirement nest egg into infrastructure assets.

But it seems the industry is looking to increase fund member exposure to this area by structuring loans to fund particular projects.

This allows the banks to reduce their risk and pass it on to our super funds, whilst the super funds gain a return from the interest they charge.

The problem I see is that Australians are already not happy with the returns from super funds and to allocate more of their retirement savings into an area that has no capital growth will only serve to compound the issue.

I believe the super funds would be better off buying the banks to get a better return on your money, as they will not only get a good income stream from dividends, but also capital gains and all with less risk.

So what can we expect in the market?

A week can sometimes be a long time in the share market, but there are times when it may not seem long enough. Last week the market was bearish, falling away and wiping off nearly 50 per cent of the gain made since February 9, whilst this week the opposite has occurred with the market now trading above the high of last week.

One thing I have learnt in all my years is not to get caught up with the short term moves on the share market as it can lead to costly mistakes.

Given the recent strength of our market I am reasonably confident we have seen the yearly low, which means the market will now move up into June or July to between 5000 and 5200 points, and possibly beyond.

One thing I would suggest is the market is not likely to rise as fast as it did last year between March and June, therefore don't expect stocks or your portfolio to repeat the performance seen in 2009.

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