Super returns bounce back from August sharemarket jitters: Chant West

While both international and domestic sharemarkets witnessed significant sell-offs in early August, they have largely managed to recoup those losses and Chant West analysis suggests the median growth fund is down only 0.6 per cent in August so far.

This means member balances are up about 1.4 per cent from where they finished FY24, it said.

Looking at the performance of super returns over the last month, the research house said the new financial year was “initially off to a flying start for super funds”.

The median growth fund (61–80 per cent in growth assets) rose 2 per cent in July, while all growth (96–100 per cent in growth assets) and high growth (81–95 per cent in growth assets) were up 2.8 per cent and 2.3 per cent, respectively.

VIEW ALL

View all

Meanwhile, the median balanced fund (41–60 per cent in growth assets) was up 1.6 per cent and the conservative option (21–40 per cent) was up 1.3 per cent over the month.

According to Chant West senior investment research manager Mano Mohankumar, softer inflation data from the US, followed by the US Federal Reserve hinting at rate cuts in September, drove both share and bond markets in July.

Australian shares surged 4.1 per cent, he said, while international shares were up 1.2 per cent in hedged terms.

“But the depreciation of the Australian dollar powered the return in unhedged terms to 4.1 per cent,” Mohankumar said, highlighting that, on average, super funds have about 70 per cent of their international shares exposure unhedged.

He also said that, over the month, there was a rotation in the market with the value style significantly outperforming growth stocks.

“With bond yields falling in July, bonds too had a strong month, with Australian and international bonds up 1.5 per cent and 1.9 per cent, respectively,” he said.

Reflecting on the market volatility observed in early August, Mohankumar reiterated the long-term focus of super returns in the face of short-term panic.

“We know from past experience that share markets, which remain the main drivers of growth fund performance with a 55 per cent allocation on average, can be incredibly resilient,” he said.

“Members should also take comfort in the fact that most have their super invested in well-diversified portfolios that have their investment exposure spread across a wide range of asset classes. This helps provide a smoother return journey by cushioning the blow during periods of share market volatility, while capturing a meaningful proportion of the upside when share markets perform well.”