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Bounce back not quite high enough

A STRONG rebound in international shares in March was not sufficient to offset a subdued Australian market, with local funds under management declining slightly.

An Intech Financial Services report indicated that funds with a high international exposure performed better than those funds with a high preference toward Australian shares.

International shares returned 4.1 per cent in local currency terms. However, an appreciation in the Australian dollar affected Australian investors, setting the net return back to only 1 per cent on an unhedged basis during March.

Australian shares returned 0.6 per cent for the month, while unlisted property performed strongly with a return of 2.2 per cent and listed property returned 1.1 per cent.

The relatively good returns for the month were not strong enough to bring the growth funds back into positive territory for the quarter, with the median growth fund manager returning 0.3 per cent.

For the year to March, growth fund managers returned 4 per cent, affected by the appreciating Australian dollar and a 4 per cent decline in international shares on a hedged basis and -12.7 per cent on an unhedged basis.

International shares, unhedged against currency fluctuations have been the standout asset class for fund managers. For the past 10 years it had an average return of 13.1 per cent, compared with a 12.2 per cent average for Australian shares. Hedged international shares grew an average 9.8 per cent a year during the period.

Industrial stocks also moved to outperform the resources sector during the month by about 1.1 per cent.

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