Super fund members should now have more faith in superannuation, according to industry researchers Chant West, after superannuation recorded its fourth consecutive positive end of financial year return.
Chant West said the median growth fund - which a majority of super fund members are invested in - will post a return of about 15.5 per cent, the second highest financial year return in the last 16 years and the fourth consecutive positive result.
“The resurgence over the year has been quite remarkable, given that it has been achieved against such an uninspiring economic background,” Chant West director Warren Chant said.
“It shows the resilience of investment markets and the importance of maintaining your strategy even in the most difficult times, like the depth of the GFC.
“Hopefully, what we’ve seen over the past four years will have restored members’ faith in superannuation as an important and efficient vehicle to fund their retirement.”
Mr Chant said that the cumulative return over the last four years was 40 per cent, which translated to 8.8 per cent per annum - above the typical growth fund objective of 6.5 to 7 per cent per annum.
He said the more aggressive super fund categories had a higher weighting to shares and listed property and therefore performed better than the conservative options.
Mr Chant said this marks a return to “normal”, where higher risk is rewarded with higher returns.
“While global growth was sluggish, the liquidity being pumped into the system by central banks coupled with reductions in what were already very low interest rates, maintained the appetite for growth assets - mainly shares and listed property,” Mr Chant said.
Australian shares rose by 21.9 per cent over the year and listed property also performed strongly, with Australian and global REITs up 24 and 17.2 per cent respectively.
However, Mr Chant said that going forward, real growth is needed rather than optimism.
“Over the final six weeks of the financial year we saw share markets retreat,” Mr Chant said.
“This was mainly a reaction to comments by Ben Bernanke, the US Federal Reserve Chairman, who simply reiterated that monetary stimulus couldn’t last forever.
“The market reaction - or overreaction - to those comments gave us a glimpse of how fragile investor confidence is and how much relies on continuing central bank intervention.”