Super funds benefit from strong share market rally

Growth-orientated strategy gains in the superannuation industry returned 12.7 per cent over the year ending 2012 due largely to a bounce-back in the Australian share market, according to Chant West.

With the Australian share market posting a nearly 20 per cent return for the year, median growth superannuation funds (61 to 80 per cent in growth assets) produced a 12.7 per cent positive return for the calendar year to 31 December 2012.

This compares to cash, which produced the worst return of all asset sectors, and conservative funds (21 to 40 per cent growth) producing an 8.8 per cent per cent return for the 2012 year-end.

Chant West director Warren Chant said "that should help drive home the message that it is dangerous to try to 'time' investment markets".

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He added that well-diversified funds performed better, benefitting from their weighting to listed shares and real estate investment trusts (REITs) whilst also having the ability to better manage risk in a downturn.

This was also highlighted in research from SuperRatings, which found that balanced funds delivered 11.7 per cent in the 2012 calendar year and - over the past decade to 31 December 2012 - the median balanced option outperformed the median cash option by 19.8 per cent.

Of Chant West's top-performing growth funds, Colonial First State FirstChoice Growth (16 per cent), UniSuper Balanced (15 per cent) and AXA Super Direction Balanced (14.5 per cent) produced the best returns.

With master trusts typically having a higher weighting to listed shares and property, there were six to be found in the top 10.

Three industry super funds also made it into the list due to their broader spread of investments cushioning them from the worst of 2011's poor share market performance.

Chant said superannuation returns - despite recovering nearly 41.5 per cent since the 27 per cent lost during the course of the global financial crisis (October 2007 to the end of February 2009) - are only 3 per cent above pre-GFC levels.

"The typical objectives for a growth fund is to beat inflation by 3 to 4 per cent over rolling five-year periods, and to post a negative return no more frequently than one in every five or six years on average," Chant said.

"If we look back over the past 20 calendar years, we can see that funds have achieved those objectives."

SuperRatings chairman Jeff Bresnahan added that the run of positive returns for balanced options may also help to drive an improvement in personal super contributions and may provide a more attractive investment for those members looking to allocate discretionary funds.

The top 10 performing balanced investment options over the past five years to 31 December were led by LGsuper Accum-Balanced (3.8 per cent), Commonwealth Bank Group Super - Mix 70 (3.3 per cent) and REST Industry Super - Core Strategy (3.2 per cent).