Lifecycle super product performance figures released by Chant West

Super fund investment returns are off to a “good start” says firm Chant West, which also released performance figures for ‘lifecycle’ products.

The ‘median growth fund’, 61-80% growth assets, returned 1.1% in July. This maintains the momentum from the “healthy” return of 9.4% in 2017/18.

The return in July was largely due to the share markets. International shares “had a stellar month”, up 3.2% currency hedged and 2.5% unhedged. Australian shares were up a “more modest” 1.3%.

Australian listed property was up 1%, while international property was up 0.9%.

“Our Growth fund category encompasses the funds in which most Australians have their superannuation,” said Chant West senior investment research manager Mano Mohankumar.

“It includes the MySuper default options for those funds that have opted for a ‘traditional’ diversified growth portfolio as well as a number of non-default options that are available to members who make their own investment choice.”

Chant West releases Lifecycle product performance figures

“While our Growth category is still where most people have their super, an increasing number are now in so-called ‘lifecycle’ products. Most retail funds have adopted a lifecycle design for their default MySuper option. A few not-for-profit funds have also gone down the lifecycle path, so overall about a third of MySuper default money is now in a lifecycle product,” Mohankumar said.

He noted that it was difficult to make direct comparisons between the performance of traditional single risk categories and the age-based lifecycle options. So Chant West have started a separate analysis of retail lifecycle products.

Performance of median MySuper Lifecycle products

Data Source: Chant West. Note that Chant West says these are “early results” and that lifecycle is the most common MySuper default for retail funds, while the MySuper Growth option consists “mainly” of not-for-profit super funds.

Mohankumar warns that “caution should be taken when comparing the performance of the lifecycle cohorts with the median MySuper Growth option as they are managed differently so the level of risk varies”.

But the data “does give an indication of how the different growth asset exposures of the lifecycle cohorts affect their performance”.

Mohankumar said that, as expected, the options with higher growth asset allocations have done better, given the returns on these assets in recent years.

“Younger members of retail lifecycle products – those born in the 1970s, 1980s and 1990s – have been holding their own compared with the median MySuper Growth fund over the first 4 ½ years of MySuper but have done this by taking on more equity market risk. Strong returns are especially valuable at younger ages because they create a higher asset base from which growth can compound over the long period to retirement.”

“Older members – those born in the 1960s or earlier – have underperformed traditional MySuper Growth options by some margin. The returns are lower because these older cohorts have taken on less risk.  This is because capital preservation becomes more important at those ages so, while they miss out on the full benefit of rising markets, older members in lifecycle strategies are better protected in the event of a market downturn.”

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