Super returns climb for fourth month in a row

The median growth fund (61–80 per cent in growth assets) delivered 1.9 per cent in February as super funds continue to witness an upward trajectory in returns, according to Chant West.

The return over the past four months stands at 9 per cent, it noted, lifting the return over the first eight months of the 2023–24 financial year to 6.7 per cent.

The median balanced option (41–60 per cent growth assets) returned 1.3 per cent and the conservative option (21–40 per cent growth assets) returned 0.6 per cent.

The assets with larger allocations to growth assets, namely high growth (81–95 per cent) and all growth (96–100 per cent) delivered 2.4 per cent and 3 per cent, respectively.

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The strong result was buoyed by international sharemarkets, fuelled in large part by healthy corporate earnings results, Chant West’s Mano Mohankumar observed.

“Economic data released during February again showed continued resilience in the US economy, which weakens the case for interest rate cuts in the near term,” the senior investment research manager said.

Over the month, emerging market shares returned 6.3 per cent, boosted by a sharemarket rebound in China, which outpaced developed market international shares at 5.9 per cent in hedged terms and 4.7 per cent in unhedged terms.

Mohankumar noted Australian shares were also on an upward trend, rising a more modest 1 per cent.

Meanwhile, as expectations of interest rate cuts in the near term faded, bond yields rose over the month that resulted in bond markets slipping slightly. International bonds were down 0.8 per cent while Australian bonds were mildly better off at 0.3 per cent.

“As a result of the strong sharemarket rally in recent months, there’s a little nervousness around sharemarket valuations,” Mohankumar admitted.

But most Australians have their super invested in well-diversified portfolios, he added, which will help them navigate the ups and downs of markets over the long term.

He pointed out: “While listed shares, with a 55 per cent weighting on average, remain the primary driver of growth fund performance, there’s a meaningful 45 per cent allocated to a wide range of other asset classes.

“That diversification provides a smoother return journey during periods of sharemarket volatility.

“At the same time, growth funds are able to capture a significant proportion of the upside when sharemarkets perform strongly as we’ve seen in recent months.”