Nearly half of growth superannuation funds (61% to 80% in growth assets) managed to generate a return in the 2019/20 financial year, with the median fund losing 0.5%, according to Chant West.
The research house’s senior investment manager, Mano Mohankumar, said it was a “topsy-turvy” year that saw funds gain 6.4% in the first seven months, then take a “severe beating” to lose 12% in a few weeks during February and March when the COVID-19 pandemic hit markets, and saw funds bounce back to 6.5% to finish the year virtually flat.
“While the end result was marginally negative, that still represents an excellent outcome given the economic damage wrought by the COVID-19 pandemic in Australia and globally. And it’s important to remember that funds had enjoyed an unprecedented run for almost 11 years through to early 2020,” he said.
“Even taking this year’s result into consideration, growth funds have returned an impressive 8.3% per annum since the Global Financial Crisis low point in early 2009. That’s well ahead of their typical return objective which equates to about 5.6% per annum.”
Mohankumar said the better performing funds over the year were generally those that had lower allocations to Australian shares and higher allocations to international shares and bonds. Funds would have also benefitted from having low exposure to listed property and listed infrastructure.
On investments the research house found over the financial year Australian shares were down 7.6% over the year. However, international shares were up 3.6% in hedged terms and 5.2% unhedged. Private equity, meanwhile, retreated 3.9%.
Australian listed property was the worst-performing asset sector, falling 20.7%, while global listed property lost 17.6%. However, unlisted property only lost 2.1%. Within the unlisted property market the retail sector fared much worse than commercial and industrial, with valuations typically down 15% to 20%, so funds with a higher allocation to retail property would have been hurt more;
Global listed infrastructure also had a disappointing year, losing 9.6%, while unlisted infrastructure was marginally positive with a return of 0.9%; and
In the traditional defensive asset sectors, bonds played their role as an important diversifier with Australian bonds and international bonds up 4.2% and 5.2%, respectively. With interest rates at an all-time low, it’s not surprising that cash returned just 0.8%.