‘Tremendous outcome’: Millions of Aussies pocketing cash boost after surprising performance by super funds

Millions of Aussies are likely thousands of dollars better off this year, due to a surprising performance by their superannuation fund. But they may not even know the common asset has achieved a “tremendous outcome” – due to strong share markets around the world driving up members’ returns. Superannuation consultant Chant West estimates the median growth fund – which has 61 to 80 per cent in growth assets – is up 10.3 per cent calendar year to date. Data from Chant West shows the average Australian invested in these funds are likely benefiting thousands of dollars. Although individual returns will vary greatly depending on what they are invested in and how much they have invested. Using the example of the average male aged 44 to 49, Chant West found they could be $24,432 better off compared to this time last year, without adding a dollar to their superannuation, if they selected the median growth option. The average female at the same age could be $16,284 again without additional contributions, if they also chose to invest in the median growth option. Last month the median growth fund returned just 0.1 per cent due to anxiety surrounding who would win the US election. It is likely to be performing stronger in early November due to the subsequent post election share market rally dubbed the “Trump Trade”. If superannuation funds close out the year this high, it would be a “tremendous outcome” for super members, according to Chant West senior investment research manager Mano Mohankumar. “It’s well ahead of the typical long-term return objective, which translates to about 6 per cent, and super fund members shouldn’t forget that this year’s result follows the better-than-expected calendar 2023 return of 9.9 per cent,” he said. “Given the strength of sharemarkets over the past two years, super fund members in higher-risk portfolios would have fared even better.” In October, both shares and bonds fell as stronger than expected economic data resulted in markets dialling back expectations of further rate cuts out of the US. At its most recent meeting in November, the Fed followed up its September 0.5 percentage point interest rate cut with a less aggressive reduction of 0.25 per cent, bringing the target range to 4.5-4.75 per cent. However, it did flag it might not need to cut rates as quickly as previously predicted. Despite the negative month for shares and bonds, super funds were able to produce a flat return in October, largely due to a bit of luck with the Australian dollar. While the Aussie market fell 1.3 per cent and the broader international shares dropped 0.9 per cent, the Australian dollar fell from a high of US69c to as low as US65c which turned into a healthy gain of 3.9 per cent for unhedged assets. Mr Mohankumar reminded members it is important that superannuation is a long-term proposition, pointing out the strong historic performance of respective funds. “Since the introduction of compulsory super in July 1992, the median growth fund has returned 8 per cent per annum, while CPI increased 2.7 per cent over the same time.” This means the real return for members is 5.3 per cent a year, which is above the typical target range of 3.5 per cent. “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 7.2 per cent per year., which is still comfortably ahead of the typical objective,” Mr Mohankumar concluded.