Chant West has said with markets also up in June so far, a positive year may still be within reach – although a flat final result would be an excellent outcome considering the chaos caused by the COVID-19 pandemic.
The median high growth option (81-95 per cent in growth assets) was up by 2.8 per cent in May, following a 3.9 per cent rise in April, while all growth (96-100 per cent in growth) was up by 3.2 per cent, following a 5.7 return the month prior.
Balanced (41-60 per cent in growth assets) was up 1.6 per cent in May, following a 2.3 per cent rise in April and conservative returned 1 per cent after it gave 1.4 per cent the month before.
But long-term performance has remained above target, with super funds having returned 6.5 per cent per annum over the last 20 years, which is still ahead of the typical return objective of 3.5 per cent.
If the current financial year does finish in negative territory, it would be the fourth year to do so since the super system began in 1992. The typical risk objective for growth funds is no more than one negative year in five.
Chant West senior investment research manager Mano Mohankumar commented: “While this financial year’s result may still finish in the red, it’s important to remember that funds have had an unprecedented run since the GFC, returning an impressive 8.4 per cent per annum since the GFC low point in early 2009.
“That is well ahead of the typical return objective which translates to about 5.5 per cent per annum over the same period.”
Mr Mohankumar said the sharemarket rally has continued into June as investors grew more optimistic around infection curves flattening and economies reopening.
But it may waver after the Fed’s grim outlook for the US economy and fears around a second outbreak.
“From a health perspective we’ve been particularly fortunate in Australia but nevertheless we – along with the global economy – are heading into a recession of unknown depth and duration,” Mr Mohankumar said.
“Whatever the pattern of the downturn and eventual recovery, sharemarkets are forward-looking and invariably recover faster than economies. However, given the ongoing economic damage, health concerns and the absence of a vaccine, we should expect the market volatility to continue, and fund members will need to remain patient and focus on the long-term prospects for their super.”
He added funds had been cushioned against the falls through their diversification.
“At the same time, with a sizeable allocation of about 57 per cent to listed shares and listed investments in infrastructure and property, funds are able to capture most of the upside when markets turn positive,” Mr Mohankumar said.
Despite positive returns in April and May, the setback in February and March resulted in options with higher allocations to growth assets in life cycle products generally faring worse over periods up to one year, the financial year to date and one year.
The higher-risk options, which covered younger cohorts born in the 1960s or later generally performed better over long periods, although not as well as the median MySuper Growth option.
Chant West noted the retail life cycle funds generally underperformed because they don’t have the same level of diversification as the not-for-profit funds – which hold around 21 per cent of allocations on average in unlisted assets, compared to the life cycle products’ 5 per cent for younger cohorts.
