Chant West estimates the median growth super fund is expected to post a loss of -1.3% for the full year 2019/20, the first time in 11 years.
The firm said this was a “good outcome” for the sector given the chaos caused by the COVID-19 pandemic and one of only four negative years in the past 28 years, with the other years being 2002/03, 2008/09 and 2009/10.
This year’s forecast returns were better than all the previous negative years with the worst being losses of 12.9% in 2009/10.
The worst performance this year was expected for all-growth super funds which held 96%-100% in growth assets and could be expected to lose 3.2% this year while the best were conservative funds which were the only sector expected to report a positive return. Conservative funds, with just 21% to 40% in growth assets, were expected to return 0.2% during the year.
Senior investment research manager at Chant West, Mano Mohankumar, said super funds had been helped by their diversification properties.
“Given all the medical and economic turmoil, funds have delivered a better result than many people would have expected. One key reason is that they maintain well-diversified portfolios invested across a wide range of growth and defensive asset sectors including, for many, a meaningful allocation to unlisted and alternative assets. That diversification works to cushion the impact during periods of share market weakness,” he said.
“At the same time, with a sizeable allocation of about 57% to listed shares and listed investments in infrastructure and property, funds are able to capture most of the upside when markets turn positive.
“This financial year’s result may be a disappointment to some members, but it’s important to remember that funds have had an unprecedented run for over 10 years, returning an impressive 8.2% per annum since the Global Financial Crisis low point in early 2009. That’s well ahead of the typical return objective which translates to about 5.5% per annum over the same period.”