Super funds performing well after early August ‘jitters’

Super funds appear to be rebounding strongly after early August’s global markets rout, with the latest data showing overall strong investment growth in the new financial year.

Markets have clawed back much of the losses experienced in the first week of August, according to data from Chant West, with figures from the researcher showing a modest 0.6% drop in super funds’ median growth fund.

Member balances are in fact up around 1.4% compared to where they finished at the end of FY24.

Global share markets took a battering on 5 August, with the benchmark ASX200 recording a 3.7% – or more than $100 billion – loss, its worst day since the onset of the Covid-19 pandemic.

The sell-off came off the back of lacklustre US jobs data as well as the Bank of Japan’s decision to hike rates for the first time in nearly two decades.

Share and bond market buoyancy through July – a result of softer US inflation data and the increasing likelihood that the Fed will cut interest rates at its upcoming September meeting – helped to soften the early August drop.

Chant West senior investment research manager, Mano Mohankumar noted that Australian shares surged 4.1% through July.

While international shares were also up by 1.2% in hedged terms, the depreciation of the Australian dollar pushed unhedged returns to 4.1%. Super funds have reaped the benefits of the Aussie’s softening, with around 70% of their international shares exposure unhedged.

Bonds have also performed well during this time, Mohankumar added, with Australian and international bonds up 1.5% and 1.9%, respectively.

Over the month to 31 July, Chant West data showed that, on average, ‘all growth’ investments – the highest risk category available to super fund members – delivered 2.8% returns. Meanwhile, ‘high growth’ and ‘growth’ categories returned 2.3% and 2.0%, respectively.

Over the three months, these risk categories delivered 5.1%, 4.3% and 3.8% returns, respectively.

With the return of volatility to the share market, Mohankumar urged super fund holders to “[maintain] a long-term focus” and not panic.

“We know from past experience that share markets, which remain the main drivers of growth fund performance with a 55% allocation on average, can be incredibly resilient.

“Members should also take comfort in the fact that most have their super invested in well-diversified portfolios that have their investment exposure spread across a wide range of asset classes.

“This helps provide a smoother return journey by cushioning the blow during periods of share market volatility, while capturing a meaningful proportion of the upside when share markets perform well.”