Expect negative full-year returns for super: Chant West

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.  

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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.”