Superannuation, along with the nation, has recovered from Covid-19 – with the median balanced fund climbing 28.12 per cent since the pestilence hit back in early 2020.

The recovery from the bottom of the pandemic slump has been even more remarkable, with a 43 per cent upswing for the median balanced fund featuring between 60 and 76 per cent of investments in growth assets.

SuperRatings did the calculations based on a balance of $50,000 pre-Covid and followed the upward path super has followed since the initial market collapse triggered by lockdowns and fear.

Although the recovery in super has been impressive, SuperRatings views the markets since as being subject to new levels of volatility.

“The Covid pandemic was a major event for financial markets around the world and while balances have recovered, we continue to see greater ups and downs in returns than prior to the pandemic,” SuperRatings director Kirby Rappell said.

SuperRatings research showed the strength of the balanced option that most Australians choose for their super.

Those who took a punt on holding all their super in the international shares allocation would have done better with a remarkable 66 per cent return from the bottom of the pandemic, but that performance was driven by a single reality.

Over that period the Australian dollar fell in value from 79 cents (USD) to 65 cents. That fall pushes up the value of foreign assets in local currency, accounting for much of the outperformance of international shares.

But it also leaves investors exposed to the negative influence of rises in the local currency so international allocations could easily underperform balanced funds when the currency market shifts.

On the other hand the conservative cash option starting at $50,000 has risen only to a value of $53,244 in that time.

The security of cash comes at the cost of lower returns than risk assets.

“With the benefit of hindsight, it is fair to say that we didn’t expect the strength of the returns experienced since the depths of the pandemic, ” Rappell said.

The returns for the current financial year are looking very positive, with Chant West reporting that the median balanced/growth fund has risen 8.8 per cent for the current financial year.

For March that allocation rose 1.9 per cent and for the first quarter of 2024 it is up 4.9 per cent.

Since a slump in sharemarkets mid last year the median growth fund is up a remarkable 11 per cent.

Chant West research manager Mano Mohankumar says that although returns have been strong overall, the first nine months of the financial year can be split into two distinct periods.

“Over the first four months (July to October), growth funds retreated 1.9 per cent but over the most recent five full months (November to March), super funds gained a stunning 11 per cent on the back of the strong sharemarket rally,” Mohankumar said.

“The financial year to date return of 8.8 per cent puts super funds on pace for a 13th positive return out of 15 years.”

There have been good returns this financial year for most fund members, but some funds have shot the lights out with double-digit returns.

The top performer Hostplus Index Balanced Fund returned an astonishing 11.59 per cent over nine months while No.10 on the charts, ANZ, returned a very respectable 9.5 per cent.

Unusually, half of the top 10 were retail funds who have likely performed well because they tend to have higher sharemarket exposures than the industry sector.

That means they do well when sharemarkets recover as they have in recent months.

Over three years, SuperRatings charts show that nine of the top 10 were industry funds. Qantas was the sole not-for-profit employer fund.

The industry sector tends to do well over the longer term because it has greater exposures to non-market products like property, private equity and venture capital which offer smoother returns than the markets.

Over three years returns for the top 10 funds ranged from 8.86 to 7.17 per cent.

Chant West found the median growth fund return over that period was 7.17 per cent.

That is well above the traditional target of super funds when the system was established of CPI plus 3.5 per cent – a total of 6 per cent over three years.

The 8.8 per cent rise for the median balanced fund this financial year would have turned a $150,000 balance into $163,200.

Mohankumar pointed to volatility in the market being experienced in April as a result of Israel-Iran conflict.

“It’s a good time to remind members that super is a long-term investment and there will be ups and downs along the way.”

However the typical well-diversified portfolios where most Australians hold their super “have weathered previous periods of market volatility, and they continue to meet their long-term risk and return objectives,” Mohankumar said.

The New Daily is owned by Industry Super Holdings