Many happy returns: Super funds surge, but how much depends on your birthday
Australia’s superannuation funds could produce a positive return for the financial year with the median return hitting 2.3 per cent for the first nine months.
Those born from the 1970s on were more likely to have a better return
Chant West said there had been an improved performance from the funds in March despite investor concerns relating to Russia’s invasion of Ukraine, rising inflation and an expected hike in interest rates.
Younger investors in “lifestyle products” that were geared to their relative age groups had significantly better return because they were exposed to more risk.
Chant West said those born in 1970s, 1980s and 1990s had generally outperformed, or were at least in line with the median growth fund over periods longer than three months.
For the year to date that meant a return of 2.4 per cent compared to 1.5 per cent for those born in the 1960s who were nearer to retirement and more risk averse.
Those born in the 1950s had a 0.3 per cent return for the year so far, but they had less exposure to growth and a priority on capital preservation so they missed out on much of the benefit from the rising market.
Senior investment research manager for Chant West, Mano Mohankumar said the geopolitical and economic implications of the war were still an unknown, but it had so far caused an energy and commodity price shock which had added fuel to inflation.
He said central banks had the choice of either hiking interest rates to steady inflation or holding off and allowing economic growth to continue.
“It appears they view inflation as the more pressing issue and in March we saw the US Federal Reserve increase its target rate by 0.25 per cent with further increases expected throughout 2022,” he said.
He said the Australian sharemarket was outperforming because of its concentration in commodities. Financial stocks had also performed well.
Over the month of March, Australian shares surged 6.9 per cent. International shares did not perform as well, but were up 3 per cent, but that was hit by an increase in the value of the Australian dollar during the month which turned it into a loss of 0.9 per cent for the month, in unhedged terms.
“Clearly we are in a very turbulent period and strong investment returns are going to be hard to find.”
Over the past decade, super funds returns were up 8.5 per cent a year and that was unsustainable, Chant West said.
The goal for a typical growth fund was to beat inflation by 3.5 per cent and that translated into about 5.5 per cent to 6 per cent a year,
