Superannuation funds are heading for their first negative financial year since 1998, according to investment funds specialist Dexia. In a report issued last week, it said the negative outlook comes in light of “a disastrous year for international equities” which was “exacerbated by the impact of the rising Australian dollar on global equity investments. Uncertainty over earnings fuelled by negative earnings revisions and the prospect of interest rates rises coupled with fears of renewed terrorist attacks adversely hit markets during May 2002, said Dexia’s Deputy Chief Investment Office Winston Sammut.

International equities were the poorest performing asset class in May 2002, posting their fifth consecutive month of negative returns. Low returns were damaged further by a 5.4% rise in the value of the Australian dollar.

The estimated return for the average balanced superannuation fund was -0.6% in May. “This follows a series of negative returns throughout the past year, putting funds in the position of needing a positive 2.2% return in June to finish the year flat,” Mr Sammut said.