Despite 2023 volatility super returns still positive

Superannuation fund returns may yet end 2023 on a more positive note with the possibility of the median growth fund returning 6.5% for the year, according to the latest analysis from specialist superannuation research house, Chant West.

The Chant West analysis acknowledged the challenging environment for super fund returns throughout this year, including a 1.5% decline for the median growth fund in October, but noted that share markets had rallied strongly so far this month.

Chant West Senior Investment Research Manager, Mano Mohankumar said that in October both share and bond markets had fallen amid ongoing concern that interest rates in the US might remain higher for longer.

“The tragic events in the Middle East also weighed on markets in October. Over the month, Australian shares fell 3.8% while developed market international shares fell 2.6% in hedged terms,” he said. However, the depreciation of the Australian dollar against all major currencies reduced the loss in unhedged terms to just -1% and super funds, on average, have about 70% of their international shares exposure unhedged.”

“Emerging markets shares were down 2% for the month. Australian bonds fell 1.8% while international bonds fell 0.8%, as bond yields rose again during October.”

“Given the ongoing market volatility, super fund members need to remember that super is a long-term investment so there’ll be ups and downs along the way,” Mohankumar said.

“Members should take comfort in the fact that super funds’ portfolios have weathered previous periods of market volatility and they continue to meet their long-term risk and return objectives.”

“We caution those members who are thinking about switching to a more conservative option or cash with a view to switching back to a growth option later. Attempting to time the market more often than not results in inferior long-term investment outcomes than if you stay the course. We’d encourage those members who are considering switching investment options to speak to a financial adviser.”