Retirement
‘Stunning’ superannuation set sight on 24-year record
Superannuation funds are continuing their strong rebound from the COVID-19 downturn and are now setting their sights on a 24-year-old record.
‘Stunning’ superannuation set sight on 24-year record
Superannuation funds are continuing their strong rebound from the COVID-19 downturn and are now setting their sights on a 24-year-old record.
Stats released by Chant West show that median growth funds, or those with 61 to 80 per cent in growth assets, returned a further 1.1 per cent to members in May.
This has brightened the return for the first 11 months of the financial year to a ‘stunning 15.7 per cent’.
Chant West senior investment research manager Mano Mohankumar said super fund members who held their nerve and remained patient through the COVID crisis have been rewarded with one of the strongest years in the compulsory super era.
“Should growth funds finish the year at or around the current level, it would represent the highest annual return in 24 years. The last time we saw a higher annual result was all the way back in 1996-97 when growth funds returned 19.4 per cent,” he explained in a note to members.
Mr Mohankumar noted that the past two financial years has illustrated the strength and resilience of superannuation funds that despite taking a massive COVID-19 hit only lost 0.6 per cent in 2019-20 and has rebounded strongly in 2020-21.
“The cumulative return since the COVID low point at end-March last year is now about 25 per cent, which is amazing given the chaos the world was thrown into by COVID-19. We’re now sitting about 10 per cent above the pre-COVID crisis high that was reached at the end of January 2020,” Mr Mohankumar continued.
The superannuation researcher pointed to strong sharemarket growth being the main driver behind May’s monthly performance.
“Australian shares were up 2.3 per cent while international shares were up 1 per cent in hedged terms and 1.2 per cent unhedged. Notably, both the Australian and US market indices reached all-time record highs during the month,” he noted.
Mr Mohankumar highlighted that superannuation remains a long-term asset which is continuing to perform above market expectations.
“Since the introduction of compulsory super in 1992, the median growth fund has returned 8.1 per cent pa,” he said.
“The annual CPI increase over the same period is 2.4 per cent, giving a real return of 5.7 per cent pa – well above the typical 3.5 per cent target.
“Even looking at the past 20 years, which now includes three major sharemarket downturns – the ‘tech wreck’ in 2001-2003, the GFC in 2007-2009 and COVID-19 in 2020 – the median growth fund has returned 6.8 per cent pa, which is still well ahead of the typical return objective,” Mr Mohankumar concluded.
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