Superannuation funds are “poised” to equal the record for consecutive years of positive investment returns, at nine years, says firm Chant West.
Early estimates put the returns for 2017/18, for the median growth fund, at an “impressive” 9.2%. This makes a nine year streak of positive returns, the other time this number of consecutive years of positive returns was achieved was between 1992/93 to 2000/01.
“Growth funds will post another strong return for the 2018 financial year and extend their streak of positive years to nine, with some funds delivering double digit results,” said Chant West senior investment research manager Mano Mohankumar.
“That’s a fantastic result, 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.”
Mohankumar said that, though the yearly performance will receive most of the attention, it’s important to look at the long-term returns.
“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%, or an average of 9.5% per annum. That’s nearly 7.5% 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% and 4% annually.”
“As always, some funds have performed better than others. This year’s top funds may report returns as high as 11.5%, which is about 9.5% above the inflation rate. Even funds at the bottom end of the range are likely to achieve that performance objective with a return of about 6.5%.”
According to Chant West, the super funds that performed better in 2017/18 had higher allocations to listed shares – particularly (unhedged) international shares – and unlisted assets.
“Looking at the two major industry segments, we expect industry funds to finish the year ahead of retail funds by about 1%, and that’s mainly due to their different approach to defensive assets.”