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Superannuation funds have continued their strong start to the financial year, with the median growth fund adding 1.3% in August.
Chant West says that with international share markets trading higher in September so far, they estimate the median growth fund is up 3.2% over the first two and a half months of the financial year.
Chant West head of Superannuation Investment Research, Mano Mohankumar, said share markets, which were the main drivers of growth fund performance, performed well in August.
Australian shares reached new highs after advancing 3.2% over the month, buoyed by a strong rebound from the resources sector. Despite ongoing uncertainty around where tariffs will land, international shares also performed well, supported by a robust US corporate earnings season and increasing expectations of an interest rate cut by the US Federal Reserve at its September meeting.
Share markets in developed economies gained 2.1% "in hedged terms", he said, but the appreciation of the Australian dollar limited that return to 0.9% in unhedged terms.
Mr Mohankumar said that over the same period, Australian and international bonds posted gains of 0.3% and 0.5%, respectively.
Since the introduction of compulsory super in July 1992, the median growth fund has returned 8% per annum. The annual consumer price index increase over the same period is 2.7%, giving a real return of 5.3% p.a. – well above the typical 3.5% target. Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020, and the high inflation and rising interest rates in 2022 – super funds have returned 7.1% p.a., which is still comfortably ahead of the typical objective.
