After a five-month streak of positive returns, the median growth fund (characterized by 61% to 80% growth assets) witnessed a downturn of 1.7% in April. However, early May market activities suggest a favorable close to the financial year, projecting an overall return nearing 8%.
Senior Investment Research Manager at Chant West, Mano Mohankumar, attributed April's dip to synchronized declines in both share and bond markets, driven by the U.S. Federal Reserve's unexpected stance on interest rates.
"In April, Australian shares fell by 2.9%. International shares also took a hit, dropping 3.2% and 3.3% in hedged and unhedged terms, respectively. Bonds weren't spared either, with Australian bonds falling 2% and international bonds 1.7%, as rising bond yields took their toll," Mohankumar explained.
Despite this, Mohankumar emphasized the robust growth seen over the financial year so far, amidst widespread uncertainty surrounding inflation, the Fed's rate policies, and ongoing geopolitical strife. "The substantial financial year return highlights the advantages for members who stayed patient and focused on long-term gains," he added.
Reflecting on recent years, Mohankumar said, "Two years ago, we were dealing with the aftermath of FY22, which ended with a disappointing June quarter faced with surging inflation and unclear interest rate scenarios. No one could have predicted an 18% return over the subsequent two years. This underscores the importance of sidelining short-term distractions in favor of a long-term financial strategy."
Mohankumar concluded by affirming that over the long run, super funds continue to achieve their return and risk goals, estimating an 8% return for FY24. "If the trend holds, this will mark the 13th positive return out of the past 15 years for super funds," he said.
