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Super still promises ‘healthy’ return for FY23–24: Chant West

By Rhea Nath
3 minute read

The research house has offered a silver lining after super funds returns saw the end of a five-month streak last month.

Superannuation funds saw a pullback in April, with the median growth fund (61 to 80 per cent in growth assets) down 1.7 per cent over the month, the first decline since October 2023.

The all-growth option (96 to 100 per cent in growth assets) and high growth (81 to 95 per cent growth assets) saw steeper falls of 2.3 per cent and 1.9 per cent, respectively.

Meanwhile, on the other end of the spectrum, the conservative (21 to 40 per cent growth assets) option saw a more modest decline of 1.1 per cent, as did the balanced option (41 to 60 per cent growth assets) at 1.4 per cent.

However, research house Chant West remains more optimistic, pointing out the median growth fund’s return for FY2024 is sitting at a healthy 8 per cent, with less than seven weeks of the financial year remaining and markets on the upswing in May.

“The big story is the healthy return over the financial year to date, despite all of the uncertainty around inflation and expectations of when the Fed will start cutting rates, not to mention ongoing geopolitical tensions,” said Mano Mohankumar, Chant West senior investment research manager.

In April, returns were down amid dampened expectations of interest rate cuts from the US Federal Reserve in the near term.

“Over the month, Australian shares fell 2.9 per cent. International shares slipped 3.2 per cent and 3.3 per cent in hedged and unhedged terms, respectively,” Mohankumar shared.

Meanwhile, Australian and international bonds fell 2 per cent and 1.7 per cent, respectively, as bond yields rose.

However, he pointed out the return experience over FY23 and FY24 so far collectively “represents a healthy reward” for members with a long-term focus.

“If you think back to nearly two years ago, FY22 closed with a particularly disappointing June quarter amid surging inflation and uncertainty as to when interest rate rises might come to an end,” he said.

“At that time, I don’t think anyone could have foreseen a return of nearly 18 per cent over the subsequent two years.”

Last financial year, funds saw a return of 9.2 per cent.

“Over the long term, super funds continue to meet their return and risk objectives and our estimate of 8 per cent for FY24 puts super funds on pace for a 13th positive return out of 15 years,” Mohankumar remarked.

He added: “It’s just another important reminder to put short-term noise aside and focus on the long game.”