Superannuation funds have had another strong year, with the median growth fund returning an impressive 9.3% for the 12 months to the end of December, according to figures just released by Chant West.
This result, for a fund with 61%-80% of investments in growth assets, follows returns of 9.9% in 2023 and 11.4% in 2024, translating into nearly 35% growth over the past three years.
Chant West Senior Investment Research Manager Mano Mohankumar said super fund members invested in higher risk portfolios did even better last year.
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Offshore returns impressive
Mr Mohankumar said international share markets were the key driver of 2025's strong performance, delivering 18.6% on a currency-hedged basis, despite uncertainty around tariffs and geopolitical tensions.
He explained further:
International shares in unhedged terms was lower, with a 12.5% return due to the appreciation of the Australian dollar over the year (up from US$0.62 to US$0.67). On average, growth funds have 31% in total invested in international shares and 25% allocated to Australian shares, with Australian shares also contributing meaningfully, returning 10.7%. It also helped that all major asset classes generated positive returns over the period.
Mr Mohankumar said Chant West was still in the process of calculating the final returns for unlisted asset classes, such as property, infrastructure, and private equity, "all of which were in positive territory''.
He added:
We estimate that unlisted infrastructure finished with gains in the 7% to 10% cent range, with private equity likely to finish with a low double-digit return. Unlisted property, which was in the red in each of the two previous years, is expected to finish with a positive return in the 3% to 6% range. Listed real assets were also up, with Australian listed property returning 9.7%, while international listed property and international listed infrastructure yielded gains of 7.5% and 11.6%, respectively. Within the traditional defensive asset classes, cash, Australian bonds and international bonds returned 4%, 3.2% and 4.4%, respectively.
Returns higher than historical trend
Mr Mohankumar said that the returns achieved over the past three years should not be considered normal, given the typical long-term goal of beating inflation by 3.5% per year, which is just more than 6% per year.
He added:
Since the introduction of compulsory super, the annualised return is 8% and the annual CPI (consumer price index) increase is 2.7%, giving a real return of 5.3% a year – well above that 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 6.9% a year, which is still comfortably ahead of the typical objective.
