Super funds were on the incline in October, with Chant West predicting the median growth fund has a good chance of ending the 2020 calendar year in positive territory.
According to the research hub, the median growth fund (61 to 80 per cent growth assets) was up 0.5 per cent in October, following six positive returns in the prior seven months.
The median balanced fund (41-60 per cent growth assets) was up 9.4 per cent, while the conservative fund gave 0.3 per cent. High growth (81-95 per cent growth assets) gave 0.6 per cent, while all growth posted 0.7 per cent.
All of the funds however have recorded a negative performance for the calendar year-to-date, with the median growth fund posting -2.3 per cent. Despite the recovery since April, the initial COVID setback is being reflected in the numbers, but Chant West has tipped the growth option has a chance at returning to positive growth.
Chant West senior investment research manager Mano Mohankumar said the climb in October was largely due to the performance of Australian shares, which returned 1.9 per cent.
International shares however, took a 3.2 per cent drop in hedged terms, due to uncertainty around the US election and surging COVID cases in the States and in Europe. The depreciation of the Australian dollar (down from US$0.72 to US$0.70) somewhat limited the loss to 1.1 per cent in unhedged terms.
“On average, funds currently have about 70 per cent of their international shares exposure unhedged and that foreign currency exposure provides a natural buffer against share market falls, as we saw in October,” Mr Mohankumar said.
But November has been positive for markets to date. Joe Biden’s election victory removed much uncertainty that had been weighing on share markets, while the news of Pfizer’s vaccine being more than 90 per cent effective against COVID-19 in testing had spread optimism.
“We estimate that the median growth fund is up over 4.5 per cent for the month to date and up a remarkable 14 per cent since the end of March, more than erasing the 12 per cent loss experienced back in February and March,” Mr Mohankumar said.
“So with just over six weeks of 2020 remaining, we estimate that the median growth is up over 2 per cent for the calendar year to date.”
In Australia, all states have COVID numbers under control, although occasional outbreaks may occur.
“The share market has reacted positively to that news and to progress reports on several potential vaccines that should become available in 2021,” Mr Mohankumar said.
Meanwhile lifecycle products were reported to be “behaving as expected”.
Chant West also added that long-term performance has remained above target despite the COVID crisis, with the median growth fund returning 6.3 per cent per annum, ahead of the typical return objective.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].