Superannuation returns are headed for double figures once again despite a slow month in May, when the median balanced fund grew only 0.5 per cent because of political fears, according to SuperRatings.

For the 11 months to May 31 the median fund rose 8.4 per cent and SuperRatings CEO Kirby Rappell was optimistic.

“Super members should expect a very solid innings from super come 30 June. We need to see an average return of around 1.5 per cent in June for balanced funds to record a double-digit gain for the financial year, which is entirely possible,” Mr Rappell said.

In the year to June 2017 the median balanced fund (with between 60 per cent to 76 per cent in growth assets) earned 10.4 per cent.

Super returns have been extremely strong with “balanced funds returning inflation plus 5 to 6 per cent for the last seven years”, Mr Rappell said.

“Normal would be inflation plus 3 per cent, so for most people super has been very fortunate for the last seven years.”

SuperRatings research found that a $100,000 balanced super fund would have grown to $181,169 over the past decade, while the best performing would have more than doubled to $203,150.

So strong have returns been for the 11 months to May 31 that they have outperformed all periods measured for up to 10 years.

Two factors have driven returns this financial year.

“Equities have fared well and alternative asset classes have been strong. Assets like private equity, infrastructure and property are part of the outperformance for not-for-profit funds and have returned CPI plus 7 per cent,” Mr Rappell said.

Nicki Hutley, partner with Deloitte Access Economics, said the outlook for markets was positive for the year ahead. “Global growth is looking quite strong and if nothing goes awry that could give international equities good returns for the year ahead.”

Growth in the US was being pushed ahead by Trump administration tax cuts and growing prosperity, she said. However that was pushing up US bond interest rates, which rose from 1.45 per cent to 2.9 per cent in the past 18 months.

That would be a negative for bonds and highly indebted companies.

“It’s so long since we’ve seen an economy with a four [per cent growth rate] in front of it that people have forgotten the upside risks,” Ms Hutley said.

The strength of returns from alternative assets along with their well-publicised lower fee structure is driving the performance of not-for profit government, industry and corporate super funds. SuperRatings found that not-for-profits have topped the performance tables.

The same phenomenon occurred in growth funds with CareSuper topping the charts at 7.5 per cent, no retail funds in the top 10  and the SR Growth Index coming in at 6 per cent for the decade.

In the 11 months to May 31 retail funds returned 7.3 per cent, while not-for-profits returned 8.5 per cent.

SuperRatings also found that super funds are moving members into more conservative asset allocations as they age. That is what investment theory says should be happening as security, not growth, is more important in the move to retirement.

“In their early working lives super members on average have a stronger weighting to Aussie and international shares with lower levels of exposure to fixed income and cash,” said SuperRatings marketing chief Gordon Toy.

“However, around the age of 50, super members on average tend to have a higher exposure to fixed income and cash at the expense of growth assets, such as domestic and international equities. By the age of 75, the average super member will have over 31 per cent of assets in fixed income and cash, compared to 17 per cent at age 20 and just over 22 per cent at age 50.”

The New Daily is owned by Industry Super Holdings