Retirement
Super funds set sights on double-digit returns
Superannuation funds have continued their “astonishing” COVID bounceback and are now likely to finish the 2021 financial year with double-digit growth, an industry expert has revealed.
Super funds set sights on double-digit returns
Superannuation funds have continued their “astonishing” COVID bounceback and are now likely to finish the 2021 financial year with double-digit growth, an industry expert has revealed.
Stats released by Chant West showed that median growth funds, with between 61 to 80 per cent in growth assets, are up 1.9 per cent over the month of March.
The strong gains in the month have led to a 3.1 per cent growth in the quarter and total growth over the last nine months of 12.2 per cent.
However, the growth is off the back of strong falls in February and March with funds down over 10 per cent for the first quarter in 2020.
Chant West senior investment research manager, Mano Mohankumar, said that with sharemarkets on an upward trend in April, there is a realistic chance that growth funds will finish FY21 in double-digit territory, which would have been inconceivable a year ago.
“Despite the brief volatility in late February on fears that a stronger than expected economic recovery may result in increased inflation, the March quarter was characterised by optimism around the global rollout of vaccines and a return to some economic normality,” Mr Mohankumar said.
The superannuation researcher noted that Australian shares were up 4.2 per cent for the quarter, while international shares were up 6.2 per cent and 6.3 per cent in hedged and unhedged terms, respectively.
Sharemarkets are up again over the first half of April, and we estimate that the median growth fund has put on a further 2.2 per cent so far this month.
“That brings the cumulative return since the end of March last year to about 22 per cent, which is remarkable given the health concerns, disruptions and economic damage caused by COVID-19. It also means that we’re more than 7 per cent above the pre-COVID crisis high that was reached at the end of January 2020,” Mr Mohankumar exclaims.
He explained the importance of having a long-term view when it comes to superannuation products, highlighting how the industry is returning an average of 8 per cent a year, well above its inflation plus 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 now COVID-19 – the median growth fund has returned 6.8 per cent p.a., which is still well ahead of the typical return objective,” Mr Mohankumar concluded.
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