Super funds have delivered a positive return for the ninth year in a row, according to early estimates, with the best performers finishing out the year in double digits and the median returns for growth funds coming in at about 9 per cent.
The top-performing funds are expected to have booked returns of about 12 per cent, while even the funds trailing at the bottom of the range are tipped to have hobbled in with a 6.5 per cent return.
“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,” Chant West senior investment research manager Mano Mohankumar said.
The median growth fund’s estimated return of 9 per cent also outperformed the broader sharemarket, with the S&P/ASX 200 returning 8.3 per cent for the 12 months to the end of June. Final figures are scheduled later this week.
The last time the nation’s super funds had a winning streak this long was from 1993 until the tech wreck of 2001, while the last negative year was during the global financial crisis in the 2009 financial year. Since then, the median growth fund has delivered a cumulative return of more than 130 per cent, an average 9.5 per cent a year, Chant West said.
The better-performing funds for the 2018 financial year were those with higher allocations to listed shares and unlisted assets. A lower exposure to traditional bonds and cash would also have helped greatly, since they were the most disappointing sectors, Mr Mohankumar said.
Australia’s biggest super fund, AustralianSuper, this month revealed its flagship balanced fund delivered returns of 11.08 per cent for the financial year, down slightly from the previous year’s 12.44 per cent.
Industry super fund Rest yesterday said its Core Strategy fund had produced an 8.76 per cent return, with shares making the greatest positive contribution to the result and property and credit also performing strongly.
Last year’s top performer, Hostplus, is also expected to release its returns this week.
After years of strong growth on global markets, warnings are starting to filter through that returns will probably slow and be more volatile in the near term.
“I think the next two to three years are going to be more challenging,” MLC Super chief investment officer Jonathan Armitage said. “We are seeing the end of the period of ultra-accommodative monetary policy in developed markets and there are more uncertainties for future earnings growth prospects and future returns than there have been for some time.”
The escalating US-China trade war is a risk to the medium-term outlook for the US and threatens to spill over into other economies, including Australia, Mr Armitage said. “Anything that impacts the ability of major economies to trade with each other will have a spillover effect into other economies,” he said.
By Cliona O'Dowd
The Australian Business Review
17 July 2018