The strong market growth seen at the start of the new financial year has continued this month, with Australian super funds reaping the benefits.
According to Chant West, the median growth fund rose 1.7 per cent in August 2021.
Attributed by the research firm to the strong performance of the ASX in recent times, this brought the total return for funds (with between 61 and 80 per cent in growth assets) for the financial year to date to around 2.8 per cent.
Chant West found that funds with less diversification fared as high as 4 per cent, while more conservative funds fared as low as 0.7 per cent.
“The main drivers of growth fund performance are listed shares, and they were up again in August,” Chant West senior investment research manager Mano Mohankumar explained.
August 2021 also marked the 11th consecutive month of positive growth for Aussie super funds.
“The remarkable rally over the past 17 months has propelled growth fund performance to an impressive 29 per cent since the COVID-induced low point at end-March 2020,” Mr Mohankumar said.
Mr Mohankumar noted that not only has this rebound seen super funds recover all the losses incurred during the early phases of the COVID-19 crisis, but exceeded that bounceback by around 14 per cent.
“That has all occurred while the pandemic continues to cause massive disruptions to lives and economies,” Mr Mohankumar said.
While the most popular super fund options remain those focused on growth, he noted a broader shift towards lifestyle funds.
“Most retail funds have adopted a lifecycle design for their MySuper defaults where members are allocated to an age-based option that’s progressively de-risked as that cohort gets older,” he said.
While comparisons between these lifestyle funds and growth funds are inevitable, Mr Mohankumar recommended that those seeking to do so keep a few of the differences between the two categories in mind.
“Care should be taken when comparing the performance of the retail lifecycle cohorts with the median MySuper Growth option, however, as they’re managed differently, so their level of risk varies over time,” he said.