Superannuation fund returns for 2020-21 are well into double figures, with the median growth fund rising 2.2 per cent for the month of April, according to research group Chant West.

“This brings the return for the first 10 months of the financial year to a remarkable 14.7 per cent,” Chant West senior research manager Mano Mohankumar said on Friday.

“With less than two months of the [financial] year remaining, a final result in double-digit territory is looking increasingly likely.”

The remarkable turnaround came after median growth funds, which consist of 61 to 80 per cent growth assets, dropped 12 per cent in March-April 2020.

Interestingly, this financial year-to-date return is the same as what was achieved in the 12 months to June 2019 despite the COVID-19 crash.

The recovery has been so strong that it is being eclipsed only by the buoyant year of 2012-13, when median growth funds reported returns of 15.6 per cent as markets recovered from financial crises in Europe.

Funds, Mr Mohankumar said, had “shown their resilience again”.

Last financial year, for example, funds limited the COVID-induced damage, posting a small loss of 0.6 per cent.

That negligible loss came as funds made up some ground from their April nadir as global stock markets began to bounce off lows.

Astonishing returns

“The cumulative return since the end of March last year is about 22 per cent, which is astonishing given the health concerns, disruptions and economic damage caused by COVID-19,” Mr Mohankumar said.

The recovery has been so strong that the median growth fund was more than 7 per cent above pre-COVID highs by the end of April.The table above demonstrates the real strength of superannuation over time in all categories.

Chant West found that over all time frames, from 3 years to 15 years, all risk categories met their long-term return objectives.

These range from consumer price index (CPI) plus 2 per cent for conservative funds to CPI plus 4.25 per cent for funds in the all growth option.

Shares drove the rise

“Share markets, which are the main drivers of growth fund performance, had a strong month in April,” Mr Mohankumar said.

“Australian shares were up 3.7 per cent for the month. International shares were up 4.1 per cent in hedged terms, but the appreciation of the Australian dollar over the period pared the gain back to 3.2 per cent.”

Return figures mean the average male balance of $168,500, according to ASFA’s latest figures, will have risen to $193,269 in the 10 months to April 30.

The average female balance of $121,300 will have risen to $139,131 in that time.

The rolling 10-year return from the median growth fund has been ahead of the target return of CPI plus 3.5 per cent for all but seven years of the past 20 years according to the chart below.

And even when returns have fallen below the target level they have remained well in positive territory on a rolling average basis.

The chart also identifies how strong the post COVID-19 recovery has been in comparison to the massive decline experienced during the GFC.

The GFC saw median growth super fund returns slump by a massive 26 per cent.

Quick action by governments and the rebalancing of superannuation fund portfolios to bring in more alternative assets such as infrastructure and private equity meant funds were not as exposed to share markets.

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