Resurgent share markets have helped drive super funds to their best returns in 20 years with the median growth fund returning 17.5 per cent — the second highest performance since the introduction of compulsory super in 1992, according to the latest Chant West superannuation fund performance survey.
2013 was a strong year for super funds, particularly those invested in Australian and international shares, according to the data. The top-performing fund for the year was REST Core, which returned 19.7 per cent, while the worst-performing fund in the category gained 11.3 per cent.
Chant West director Warren Chant said the great majority of Australians were in their employer's default growth fund, and that if they had remained invested in the same fund beyond the GFC-affected years they will have emerged with their savings relatively unscathed.
"The contributions going into their accounts during those GFC-affected years have bought assets at depressed prices. That's one of the benefits of our system where contributions go in regularly, regardless of the state of financial markets. Sometimes you're buying assets at bargain prices, even if you don't appreciate it at the time," Chant said.
Regardless of differences between funds' investment strategies, Chant said share market performance was the main influence on the overall performance for growth funds. This was due to listed shares and property being the biggest components of their investment mix, accounting for 57 per cent of their investments in those sectors.
The survey states the investments driving performance for the 2013 calendar year were unhedged international shares delivering a 48 percent return, and Australian shares returning 19.7 per cent.
Currency movements were also a major factor, with Chant saying the funds that did best were those that had significant investments in international shares and chose to have a lower portion of their foreign currency exposure hedged.
Industry funds outperformed retail funds in 2013 despite share market exposure that usually favours master trusts, with the survey showing industry funds finishing the year ahead, returning 17.4 per cent versus 16.9 per cent.
Industry funds also hold the advantage over the longer term, according to Chant, as they have lower allocations to listed shares, and their strategic allocation to unlisted assets has added to performance and reduced volatility, or risk.
While the 17.5 per cent financial year return is an exceptional result, Chant cautions members not to get carried away with a one-year figure. "You've always got to remember that superannuation is a long-term investment. There will be good times and bad times, and you certainly can't expect returns like this every year."
