With these trends, Chant West projects that median growth funds, which typically allocate 61% to 80% of their assets to growth investments, could realize an impressive 11% return for the full calendar year of 2024. This marks a continued success streak for growth funds, achieving positive returns in 12 out of the past 13 years.
Mano Mohankumar, Senior Investment Research Manager at Chant West, noted the robust diversification strategies employed in these growth funds. "An average growth fund holds around 30% in international shares and about 25% in Australian equities. Despite the volatility, Australian shares have produced a commendable return of approximately 13%," he explained.
In addition to equity performance, Chant West's data indicates that almost all asset classes, barring unlisted property, have recorded positive returns thus far this year. This advantage places members of higher-risk portfolios in a particularly favorable position.
The upward trajectory of growth fund returns follows a commendable performance for the 2023 calendar year, which yielded returns of 9.9%. This rise renders the prior year's loss of 4.6% considerably less significant, reaffirming that super funds are effectively meeting their long-term risk and return benchmarks.
Historically, the risk profile of these funds reveals that there have been only five negative years since the inception of compulsory superannuation in 1992. This statistic translates to negative returns occurring less than once every six years, outperforming the expected norm of one negative return per five years.
Since 1992, the median growth fund has generated an average annual return of 7.9%, well above the 2.6% increase in annual CPI during the same period. This translates to a substantial real return of 5.3% per annum, comfortably exceeding the typical target of 3.5%.
This recent surge in superannuation fund performance underscores the effectiveness of long-term investment strategies that balance risk and return. As investors navigate the evolving landscape, the potential for sustained growth in their super funds remains bright.
As noted in Chant West's recent findings, the combination of international and domestic market investments contributes significantly to the resilience of superannuation returns, even amidst changing economic conditions.
