Median fund growth estimated to hit 8.5% by EOFY

Resilient sharemarkets have been attributed as the main driver of returns, with the median growth fund return expected to sit at about 8.5 per cent by the end of the financial year, according to Chant West. 

This followed a slight pullback in May where the median growth fund was down some 0.4 per cent over the month.

In April, Chant West analysis predicted super funds could finish the financial year with an 8.1 per cent return, well above the typical long-term return objective of around 6 per cent per annum, driven by the positive performance of bonds and shares. 

“At a time when many Australians are feeling financial stress due to high inflation and the surge in interest rates, the better-than-expected financial year return would provide some good news,” said Mano Mohankumar, Chant West senior investment research manager. 

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“It’s a reward for super fund members who have remained patient and maintained a long-term focus. Remember that the 2022 financial year closed with a final quarter loss of 5.5 per cent amid surging inflation and uncertainty as to when interest rate rises might come to an end. 

“At that time, we didn’t think that a year down the track, we’d be looking at a solid annual return in the order of 8.5 per cent, so it’s another reminder to put short-term setbacks to one side and focus on the long game.”

In May, Australian shares were down 2.5 per cent while international shares fell by 0.2 per cent in hedged terms, though a slight depreciation of the Australian dollar pushed that to positive territory at 1.2 per cent in unhedged terms. 

Australian bonds were down due to rising yields, retreating 1.2 per cent. Meanwhile, international bonds were down 0.5 per cent. 

Mahankumar noted the US Federal Reserve raised interest rates by 0.25 per cent in May and kept rates on hold in June after 10 consecutive rises, though chair Jerome Powell anticipates further increases to bring down inflation to its target of 2 per cent.

Meanwhile, the Bank of England and European Central Bank had both raised rates by 0.25 per cent in recent meetings. 

In China, there appears to be disappointing economic data and weakening demand despite its much-anticipated opening last year. 

Inflation remained stubborn in Australia, with the official cash rate at its highest since April 2012 at 4.1 per cent given the June rate hike.