Australian super funds have extended their winning streak, showing impressive returns for the sixth consecutive month. As global equities perform strongly and long-term returns remain resilient, superannuation funds are delivering positive outcomes for members. But with just three months left in the year, will this trend continue?
Super Funds’ Strong Performance Amid Global Forces
Super funds have seen strong results throughout September, with the median growth fund, which typically holds between 61% and 80% in growth assets, returning 0.8% for the month. This is particularly significant considering the rocky road that global markets have often travelled in the last few years. But for the last six months, these funds have been on a roll.
According to data from Chant West, global equities have been one of the main drivers of this success. In particular, international shares have had a stellar month, with developed international shares returning 3.3% and emerging market shares outperforming even that, with an impressive 5.8% increase. This surge in emerging markets is the best return they’ve seen in over two years, thanks to some renewed optimism around the US tech sector and AI.
Australian Shares and Bonds: A Mixed Bag
While international markets were on fire, the performance of Australian shares has been a little less exciting. Domestic shares saw a modest decline of 0.6%, which was largely influenced by the fading expectations of interest rate cuts, due to stronger-than-expected economic data and stubborn inflation. This is a reminder that, despite the positive momentum globally, Australia’s own economic outlook still has some hurdles to overcome.
However, Australian bonds saw a slight positive return, rising 0.1%, while international bonds returned 0.7%. These more conservative assets didn’t show stellar growth but added some stability to diversified portfolios.
Long-Term Stability of Super Funds: Consistency is Key
Despite some bumps along the way, superannuation continues to be a great long-term investment. Since the introduction of compulsory superannuation in 1992, the median growth fund has delivered an average return of 8% per annum, well ahead of inflation, which has averaged 2.7% over the same period. This means that Australians have seen a real return of 5.3% per year, a solid result for those investing for their retirement.
Even with the turbulence of the global financial crisis, the COVID-19 downturn, and the challenging economic conditions in 2022, super funds have kept their heads above water. Over the past 20 years, despite significant market volatility, super funds have still managed to return an average of 7% per year—well above the target of 3.5%.
What Does This Mean for Super Funds Members?
The key takeaway here is that superannuation is a long-term game. While the markets have fluctuated, and there have been ups and downs, those who stay the course are likely to see good returns. Super funds are designed to perform over decades, and although short-term results can vary, the long-term growth has been impressive.
For those looking at their super balance today, it’s important to remember that past performance is no guarantee of future results, but history suggests that, overall, super funds have consistently outperformed their targets. And for members who continue to contribute regularly, this steady growth could lead to a more comfortable retirement.
