Superannuation funds have bounced back strongly from a lacklustre March to be performing well so far this month, industry analyst Chant West says.
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Strong bounce back
Indeed, on their numbers, funds have almost entirely made up the losses chalked up in March, after markets fell following the US going to war with Iran in late February.
On the numbers calculated by Chant West, the median growth fund fell 3.2% in March, however, the funds have bounced back as share markets rallied, adding 3.1% in April so far, almost offsetting the March falls.
Chant West Head of Superannuation Investment Research, Mano Mohankumar, said the April rally was driven by optimism around a potential de-escalation in Middle East tensions, easing oil prices, and solid corporate earnings.
He added:
The experience since the start of March is another clear reminder of why it's important for super fund members to stay patient and maintain a long‑term perspective. Members who panicked after seeing their balances fall in March and switched to lower‑risk options or cash not only crystallised paper losses, but also missed out on the subsequent V‑shaped rebound. Over time, missing out on returns like these can make a significant difference to a member's balance at retirement due to the power of compounding. That's why we remind members that super is a long-term investment and encourage them to see a financial adviser if they're thinking of switching options. An adviser can help assess their broader financial position, including assets held outside of super, and ensure their investment strategy remains appropriate.
Looking at specific investment settings more closely, all growth funds fell 5.2% in March, while high growth fell 4% and balanced fell 2.5%.
For the financial year to the end of March, all growth was up 3.1%, high growth was up 2.8%, and balanced was up 6.6%.
Stronger for longer
Mr Mohankumar said over the longer term, superannuation had proven to be a robust investment.
He added:
Since the introduction of compulsory super in July 1992, the median growth fund has returned 7.9% per annum. The annual CPI increase over the same period is 2.7%, giving a real return of 5.2% per annum – 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 6.5% per annum, which is still ahead of the typical objective.
