Super fund members have something to smile about as funds delivered an average 10.7 per cent return for the year to June 30, 2017.
That double-digit performance marks the eighth consecutive year of positive growth, according to research group Chant West.
“Over the last 5 years alone, funds have averaged 10 per cent earnings every year, more than erasing the pain of the GFC and putting retirees in a significantly improved position than they could ever have hoped for,” said Jeff Bresnahan, chairman of rival researcher SuperRatings, which found similar results.
Industry funds were the top-performing segment, returning an average of 11.1 per cent. Their for-profit retail counterparts returned 9.7 per cent, meaning industry funds outperformed their competitors for all periods out to 15 years.
The strong run-up came despite the political and economic shocks of the election of President Donald Trump and Britain’s ‘Brexit’ decision to leave the European Union.
“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,” Chant West director Warren Chant said.
Among the major funds, double-digit returns were common. Industry fund Hostplus took the top spot with 13.2 per cent, and even the worst- performing fund in the median-growth category delivered a “respectable 7.4 per cent”, Chant West said.
Funds in the median growth category have 61 per cent to 80 per cent allocation to growth assets and are the ones in which most Australians are invested.
Mr Chant said that strong equity markets had boosted results with Australian shares up 13.8 per cent and international shares up 18.9 per cent, or 14.7 per cent after a strengthening Australian dollar was factored in.
“Shares are still the main drivers of performance, but the major funds are well diversified across other asset sectors as well. The better performing funds over the year were those that had higher allocations to listed shares and to unlisted assets generally. It also helped to have a lower exposure to listed property, bonds and cash,” Mr Chant said.
Industry funds have outperformed because they have lower exposures to shares and higher exposures to unlisted assets such as private equity, property and infrastructure.
“Over the longer term, the asset allocation policies of industry funds have served them very well. Those allocations to unlisted assets do mean slightly higher investment costs, but those extra costs have been more than justified by the better performance and lower volatility,” Mr Chant said.
“Industry funds have also been more prepared to shift away from their longer-term target asset allocations to take advantage of mispricing or to preserve capital. Overall, those medium-term shifts have had a positive effect on their performance,” Mr Chant said.
Rival super fund research group SuperRatings found that the average balanced-fund-in-accumulation mode had returned 10.4 per cent for the financial year. Funds-in-pension phase returned 11.4 per cent.
“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 GFC, said Mr Bresnahan.