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Superannuation funds have delivered their seventh consecutive month of gains in October, Chant West says, with the median growth fund delivering 1.2% over the month.
That figure brings the performance of the median growth fund, with 61% to 80% of its investments in growth assets, to 9.3% over the calendar year to date, while high growth was sitting at 10.3% and all growth at 12%.
Solid yearly outcome looking likely
Chant West, head of superannuation investment research, Mano Mohankumar, said that a final result near 7.8% for the full calendar year would be a good outcome, particularly given the uncertain economic and geopolitical backdrop throughout the year.
As he said on Wednesday:
That return is well ahead of the typical long-term return objective which translates to about 6%. Super fund members should also remember that this year’s result follows two exceptional years, with returns of 9.9% in calendar year 23 and 11.4% in calendar year 24. Given the strength of share markets over the past three years, super fund members in higher risk portfolios have fared even better.
Mr Mohankumar said that the positive October result was driven by outperformance in international shares markets, “which rose 2.6% and 3.3% in hedged and unhedged terms, respectively”.
Markets were buoyed by easing of trade tensions during the month, strong corporate earnings and optimism around AI. Emerging markets shares performed even better, returning an impressive 5.5%.
Australian shares finished the month in positive territory, albeit only marginally, with a return of 0.4%, while Australian and international bonds gained 0.4% and 0.7%, respectively.
Good returns over the long term
Mr Mohankumar said since the introduction of compulsory superannuation in July 1992, the median growth fund had returned 8% per year.
The annual CPI increase over the same period is 2.7%, giving a real return of 5.3% p.a. – well above the typical 3.5% target. Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020, and the high inflation and rising interest rates in 2022 – super funds have returned 7.1% p.a., which is still comfortably ahead of the typical objective.
While Australian equities notched up positive gains in October, the S&P/ASX 200 Index (ASX: XJO) has been on a downward trend in November so far, falling 4.5% from 8,881.9 points at the start of the month to 8,480 points on Wednesday morning.
The Dow Jones Industrial Average Index (DJX: .DJI) in the US is also trading below its levels at the start of the month after trading higher for the first week or so.