The average fund return for Australian super funds over the past financial year was 10.4 per cent, with research house SuperRatings estimating that $140 billion has been added to Australian super accounts in those 12 months.
“At a time when inflation hovers below 2 per cent per annum, Australian super funds continue to far exceed expectations, with accrued earnings of well over 100 per cent since the end of the global financial crisis,” said SuperRatings chair Jeff Bresnahan.
“Over the last five years alone, funds have averaged 10 per cent earnings every year, more than erasing the pain of the global financial crisis and putting retirees in a significantly improved position than they could ever have hoped for.”
The researcher said diversified balanced fund options (funds which, according to the government’s MoneySmart website, invests around 70 per cent in shares or property and the rest in cash and fixed income) had enjoyed “extraordinary success over the last quarter of a century”.
These funds have only delivered negative returns in three of the last 25 years, SuperRatings said, with only one of these being “of any materiality”.
“Over the same period we have seen 22 years of positive returns, including 10 of which resulted in double digit returns,” SuperRatings said.
“$100,000 invested in a balanced option in June 1992 would have grown to some $581,000, a compound annual growth rate of some 7.4 per cent; by comparison, inflation over the same period has been less than 2.5 per cent per annum.”
Warren Chant, the director of rival super ratings agency Chant West, said the result was in some ways surprising, given the “backdrop of considerable uncertainty” in both politics and economics over the past year.
“It just shows how markets – which represent the combined views of thousands of professional investors – are able to cut through the ‘noise’ and focus on the investment fundamentals,” he said.
According to Mr Chant, shares remain the chief drivers of returns, however the major funds are still “well diversified” across a number of asset classes.