Super funds poised for ‘healthy’ FY22–23 result

Superannuation funds look to finish the financial year with an 8.1 per cent return, well above the typical long-term return objective of around 6 per cent per annum, according to Chant West.

The median growth fund returns were up 1.2 per cent in April, propelling the return for the first 10 months of the financial year to 8.1 per cent. If sustained to June, it could offset the entire loss of 3.3 per cent from the 2022 financial year.

According to Mano Mohankumar, Chant West senior investment research manager, the positive performance of bonds and shares was mainly responsible for the rise in April.

“Australian shares were up 1.9 per cent over the month. International shares were up 1.6 per cent in hedged terms and that was boosted to 3.2 per cent unhedged because of the depreciation of the Australian dollar over the period,” he said.

VIEW ALL

View all

Australian and international bonds returned 0.4 per cent and 0.3 per cent, respectively. Earlier this month, the Reserve Bank of Australia (RBA) made its 11th increase in the last 12 months, raising interest rates by 0.25 per cent to bring the official cash rate to 3.85 per cent. 

Mohankumar noted that while US inflation had increased, it remained “stubbornly high” and in response, the Fed also raised interest rates by 0.25 per cent in early May.

“But it hinted that its rate hikes could be nearing an end as it assesses the fallout from recent bank failures,” he added.

Also, US markets were buoyed in late April by better-than-expected earnings results from several of the mega-cap tech companies. 

In Europe, sharemarkets were supported by some resilient corporate earnings results and the European Central Bank and Bank of England raised interest rates by 0.25 per cent in continued attempts to combat inflation. 

In China, sentiment took a hit due to renewed tensions with the US although economic growth data was surprisingly strong. 

According to Chant West data, since the introduction of compulsory super in July 1992, the median growth fund had returned 7.9 per cent per annum. 

With the CPI increase at 2.6 per cent over the same period, real returns stood at 5.3 per cent, well above the 3.5 per cent target.

“Even looking at the past 20 years, which includes four major sharemarket downturns — the ‘tech wreck’ in 2002–03, the GFC in 2007–09, COVID-19 in 2020 and the high inflation and rising interest rates in 2022 — super funds have returned 7.4 per cent p.a., which is still comfortably ahead of the typical objective,” Chant West said. 

It noted the median growth fund has exceeded its return objective over rolling 10- year periods for most of the time, with the exceptions being two periods between mid-2008 and late-2017, when it fell behind. 

Chant West noted this was because of the devastating impact of the 16-month GFC period (end-October 2007 to end-February 2009) during which growth funds lost, on average, around 26 per cent.