Super funds set to post ninth straight positive year

Superannuation funds are poised to deliver a positive return for the ninth straight financial year, according to Chant West.

The only previous time the country had experienced a streak that long was from 1992/93 to 2000/01, the superannuation research and consultancy firm said.

With just two business days remaining, early estimates suggest the median growth fund will post an impressive 9.2 per cent for 2017/18, while some of the better-performing funds may deliver as much as 11.5 per cent, Chant West said.

Growth funds are those that have 61 to 80 per cent of their investments in growth assets, the firm said, and are the ones in which the majority of Australian workers are invested.

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Chant West senior investment research manager, Mano Mohankumar, described the result as “fantastic,” especially given that investment managers have been saying for some time that all asset classes are close to or fully valued and that it’s becoming increasingly difficult to find additional sources of return.

“Naturally, the financial year performance will get most of the attention but it’s always important to look at the latest returns in a longer-term context. Super fund members have enjoyed a fantastic run with 2008/09 being the last negative year that most of them experienced,” he said.

“Since the GFC low point back in February 2009, the median growth fund has delivered a cumulative return of over 130 per cent, or an average of 9.5 per cent per annum.

“That’s nearly 7.5 per cent above the rate of inflation over the period, so it’s well ahead of the typical longer-term return objective which is to beat inflation by between 3 per cent and 4 per cent annually.”

Mohankumar said that when looking at the two major industry segments, Chant West expects industry funds to finish the year ahead of retail funds by about 1 per cent, mainly due to their different approach to defensive assets.

“Growth funds have between 20 per cent and 40 per cent of their money in defensive investments. For retail funds that’s mainly in cash and bonds, which are going through a period of low returns,” he said.

“Industry funds, in contrast, have a meaningful amount of their defensive exposure invested in unlisted assets such as core unlisted property and infrastructure, which have performed well for them.

“Choosing the unlisted route has worked well because the global listed property and infrastructure markets have delivered lower returns.”