Super positive in ‘stunning turnaround’ after market drop

After the swift drop, growth funds rode the market wave to surge 15.5 per cent over the remaining nine months of the year.

The nation’s super funds returned 3.7 per cent in 2020, recovering from a 12 per cent drop early in the year. Picture: NCA NewsWire / Christian Gilles

Superannuation funds staged a stunning turnaround in 2020, swinging from a 12 per cent loss in March to close out the year up 3.7 per cent, according to research house Chant West.

The sub-4 per cent return was a marked decline on the 14.7 per cent recorded in 2019 but it came after the COVID-19 crisis triggered the swiftest market correction in history.

The turnaround demonstrated the industry’s “remarkable resilience”, Chant West senior investment research manager Mano Mohankumar said.

“If we take ourselves back to late March, the prospect of finishing the year up 3.7 per cent would’ve been inconceivable,” he said.

Over February and March, major share markets took a beating as the COVID-19 crisis kicked off, with the median growth fund plunging 12 per cent.

But after the swift drop, markets rallied strongly, and growth funds rode the wave to surge 15.5 per cent over the remaining nine months of the year.

The positive return in 2020 represents the ninth consecutive positive calendar year and the 11th over the past 12 years, Chant West said.

The top performing growth fund over the year was Suncorp Multi-Manager Growth, which returned 9.6 per cent compared to the S&P/ASX 300 share index’s 1.1 per cent decline over the same period.

Others in the top ten included Australian Ethical Super Balanced, Vision Super Balanced Growth, VicSuper Growth, UniSuper Balanced, AustralianSuper Balanced, Aware Super Growth, IOOF MultiMix Balanced Growth, Prime Super MySuper and Equip Balanced Growth.

The events of 2020 highlighted the long-term nature of super and the importance of patience, Mr Mohankumar said.

“Members who sat tight generally did OK. Sadly, there were many others who panicked when markets fell and switched their investments to cash or a more conservative option.

“Not only would they have crystallised their losses, but they would also have missed out on some or all of the subsequent rebound. And, of course, there were those who withdrew their money from super completely to deal with temporary hardship, and they’ll now be faced with making up considerable lost ground.”

The other key message from the year was the importance of diversification, he said.

“Growth funds have their investments spread across a wide range of asset sectors, and that works to cushion the impact during periods of share market weakness, as we saw in February and March.

“At the same time, they still have a sizeable allocation to listed shares – about 54 per cent on average – so they’re able to benefit when those markets perform well, as we saw from April to December.”