A leading industry analyst says super funds had their best returns in 20 calendar years as share markets surged.
Superannuation analysis firm Chant West says the median growth fund – typical of so-called diversified funds – rose 17.5 per cent, largely due to such investments’ exposure to shares.
Over 2013, the ASX 200 returned just over 20 per cent if dividends were reinvested into the stock market.
That explains the strong performance of the funds heavily exposed to shares, the best of which (industry fund REST’s Core fund) returned 19.7 per cent.
Six of the 10 best performing funds last year were not-for-profit funds, while four were retail funds run by investment firms.
Even those members in the worst performing growth fund saw a return of 11.3 per cent – although this was clearly behind simply investing in the ASX 200 index.
Chant West says 2013 is the second best return since compulsory superannuation was introduced in 1992.
The firm’s director Warren Chant says super funds have had nine positive returns out of the last 11 years.
He says one of those negative years was the GFC in 2008, where funds fell an average 21.5 per cent, but the typical super fund is now about 21 per cent above its pre-GFC high, and 64 per cent higher than the low point in February 2009.
“The great majority of Australian workers are in their employer’s default growth fund, so if they sat tight while the GFC came and went they will have emerged with their savings relatively unscathed,” Mr Chant observed.
“And, of course, the contributions going into their accounts during those GFC-affected years have bought assets at depressed prices.
“That’s one of the benefits of our system where contributions go in regularly, regardless of the state of financial markets. Sometimes you’re buying assets at bargain prices, even if you don’t appreciate it at the time.”
Mr Chant says overseas markets, such as the US tended to perform better than local stocks, and the fall in the Australian dollar made those overseas holdings worth relatively more, meaning that super funds with significant overseas exposure had tended to perform best last year.
He says that, over the 21-plus years of compulsory super, the average Australian fund has delivered on the key benchmarks of comfortably beating inflation and not posting too many negative years.
“The annualised return over that period is 8 per cent, the annual CPI increase is 2.6 per cent, so the real return above
inflation has averaged 5.4 per cent per annum,” Mr Chant said.
“As for risk, there were four negative years out of the past 21 calendar years, which averages out to about one in five, so that objective was also met.”