Has super proved its value with 7.3% 20-year return?

Mike Taylor

Managing Editor/Publisher, Financial Newswire

20 September 2023

The value of superannuation as an investment vehicle has been reinforced by specialist ratings house, Chant West, which has pointed out that they have returned 7.3% per annum over the last 20 years.

The Chant West analysis pointed out that this is well ahead of the typical investment return objective.

The analysis has accompanied Chant West’s review of August returns which confirmed that the median growth fund (61% to 80% in growth assets) was down 0.1% over the month bringing the return over the first two months of the current financial year to 1.4%.

“Australian shares were down 0.8% for the month. Developed market international shares fell 1.8% in hedged terms. However, due to the depreciation of the Australian dollar over the month (down from US$0.67 to US$0.65), the return in unhedged terms was a positive 1.6% and super funds, on average, have about 70% of their international shares exposure unhedged. Bond markets were mixed, with Australian bonds up 0.7% and international bonds down 0.3%,” Chant West senior investment manager, Mano Mohankumar said.

However, looking at the broader picture, the analysis pointed out that since the introduction of compulsory super in July 1992, the median growth fund has returned 7.9% per annum.

“The annual CPI increase over the same period is 2.6%, giving a real return of 5.3% p.a. – well above the typical 3.5% target,” it said.

“Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020, and the high inflation and rising interest rates in 2022 – super funds have returned 7.3 % p.a., which is still comfortably ahead of the typical objective.”