While the 2022 financial year was a particularly challenging year for investment markets, Chant West believes superannuation funds proved their ability to limit the damage for their members.
Despite heavy falls in all the traditional asset sectors, including shares, listed property and bonds, the median growth option only retreated 3.3% over the year, according to the research house.
This compared to losses of 6.8% for Australian shares, 10.5% for Australian bonds and 11.2% for Australian REITS.
Admitting a negative result was naturally disappointing, Chant West said Australians must not forget this came on the back of an 18% result in FY21, the second-highest performance in super’s history.
Chant West senior investment research manager, Mano Mohankumar, said unfortunately the negative headlines about super performance in recent weeks had resulted in some super funds’ call centres being inundated with queries.
“A small step backwards this year is nothing to panic about. Members just need to filter out the ‘noise’ and look at the bigger picture. The negative return for FY22 represents only the fifth negative year in the full 30 years of compulsory super.
“The median growth fund is still 7.5% ahead of its high point at the end of January 2020 before the COVID-19 crisis took hold. More importantly, funds continue to meet their long-term return objectives by a comfortable margin.”
Mohankumar said when members read or hear about large share market losses, they should take a moment to realise that their super had not fallen by anywhere near as much.
“Over FY22, Australian shares retreated 6.8%, while international shares were down 12.4% in hedged terms. It was the same story for listed property, with Australian and global REITs falling 11.2% and 10.5% respectively.
“That was bad enough, but what made the year even more challenging was that bonds didn’t play their usual cushioning role, with Australian bonds and international bonds falling 10.5% and 9.3%, respectively.
“Despite all this, the median growth fund was only down 3.3%. That’s mainly because most major super funds now invest far beyond these traditional asset sectors, with meaningful allocations to private equity, unlisted property and unlisted infrastructure which all delivered healthy returns for the year.
“Some funds were able to avoid the worst of the share market losses by taking active positions away from benchmark exposures.
“Another lever that paid off was maintaining a shorter duration bond exposure which is less sensitive to rises in yields.”