The median growth fund (61 to 80 per cent in growth assets) finished the 2019/20 financial year with a loss of 0.5 per cent, according to data from the research house.
Two retail funds came out on top across growth funds. Suncorp Multi-Manager Growth was named as the top-performing growth fund, producing a one-year return of 3.8 per cent to June 2020, followed by Australian Ethical’s Super Balanced (2.8 per cent) and BUSSQ’s Balanced Growth (2.5 per cent).
IOOF’s MultiMix Balanced Growth (2 per cent) was on par with Vision Super’s Balanced Growth, ahead of Equip Balanced Growth (1.7 per cent), VicSuper Balanced (1.6 per cent) and First State Super Growth (1.3 per cent).
Meanwhile, the top 10 performing growth funds in terms of annual returns for the 10 years to June were all industry funds. AustralianSuper Balanced topped the list with 8.8 per cent, ahead of UniSuper Balanced (8.7 per cent) and Hostplus Balanced (8.6 per cent).
Chant West senior investment manager Mano Mohankumar said it was a “topsy-turvy” year that can be divided into three parts: the funds gaining 6.4 per cent on average during the seven months to January, the beating from the COVID-19 pandemic where funds lost around 12 per cent, and finally a rebound, where funds bounced back by 6.5 per cent to “finish the year virtually flat”.
“While the end result was marginally negative, that still represents an excellent outcome given the economic damage wrought by the COVID-19 pandemic in Australia and globally,” Mr Mohankumar said.
“And it’s important to remember that funds had enjoyed an unprecedented run for almost 11 years through to early 2020. Even taking this year’s result into consideration, growth funds have returned an impressive 8.3 per cent per annum since the GFC low point in early 2009.
“That’s well ahead of their typical return objective which equates to about 5.6 per cent per annum.”
The typical balanced option (41 to 60 per cent growth assets) was seen to finish June with a 0.3 per cent one-year return, while the conservative option ended on 1 per cent.
The high growth fund category (81-95 per cent growth assets) achieved an average one-year return of -0.9 per cent while all growth had -2.1 per cent.
Mr Mohankumar added super funds being well diversified across their investment portfolios was the key reason they performed better than expected.
“Shares remain the main contributors to performance with about 25 per cent allocated to Australian shares and 29 per cent to international shares on average,” he said.
“But that still leaves another 46 per cent invested across other growth and defensive asset sectors. That diversification works to cushion the impact during periods of [sharemarket] weakness.
“As an example, Australian shares were down 7.6 per cent over the year and Australian listed property fared worse, losing 20.7 per cent, but international shares and Australian and international bonds were all up by about 4 or 5 per cent, enabling funds to post a near-flat return overall.”
Australian listed property was seen to the worst-performing asset sector, falling by 20.7 per cent, while global listed property lost 17.6 per cent.
However, unlisted property only lost 2.1 per cent, Chant West noted, with retail faring worse than the commercial and industrial sectors in the asset class. Valuations were down 15 to 20 per cent, so funds with a higher allocation to retail property would have seen more damage.
Global listed infrastructure also had a negative year, losing 9.6 per cent, while unlisted infrastructure was marginally positive with a return of 0.9 per cent.
Australian and international bonds were up by 4.2 per cent and 5.2 per cent respectively, while cash returned 0.8 per cent as interest rates were at a record low.
Chant West noted the funds are still delivering on their long-term targets, despite the 2019/20 result falling short of previous years.
“Even looking at the past 20 years, which now [include] three major sharemarket downturns – the tech wreck in 2001-2003, the GFC in 2007-2009 and now COVID-19 – super funds have returned 6.3 per cent per annum, which is still ahead of the typical return objective,” Mr Mohankumar said.
“The negative result for 2019/20 represents only the fourth negative financial year over the entire period [the 28 financial years since superannuation’s inception], an average of one negative every seven years. So the risk objective has also been comfortably met as well as the performance objective.”
