How super funds performed in FY19: challenging times lie ahead

Two super funds tied for top spot for the 2019 fiscal year, returning 9.9 per cent | TOP FUNDS

Super savers have enjoyed 10 years of positive returns.

The median growth super fund delivered a 7 per cent return in the year through to June 30, in the 10th consecutive year for positive returns, says researcher Chant West.

Still, returns that strong are likely to be unsustainable, with Chant West flagging challenging times ahead as many asset sectors remain close to fully valued.

QSuper and UniSuper tied in top spot for the 2019 fiscal year, returning 9.9 per cent for the year, while even the worst performing fund in Chant West’s growth category returned 4.3 per cent.

Australian shares were up 11.4 per cent over that period. Australian listed property was the strongest performing asset sector over the year, returning 19.4 per cent. Cash was the worst performing sector with a return of just 2 per cent.

The growth category includes funds which are between 61 per cent and 80 per cent allocated to growth assets.

“Fund members should be very pleased with the fiscal year 2019 return of seven per cent,” said senior investment manager Mano Mhankumar.

“It’s better than what most experts predicted a year ago and it’s about 5.5 per cent above the current rate of inflation, well above the typical long-term objective which is to beat inflation by 3.5 per cent.”

Still, the high return was slightly below the average over the past decade, which has been 8.8 per cent per annum.

“That’s a tremendous run, but we should remember that it partly represents the recovery from the global financial crisis, which produced two consecutive financial year losses in 2008 and 2009,” Mr Mhankumar said.

“So it would be a mistake to assume that the level of returns we’ve seen recently is sustainable.

“Indeed, with many asset sectors looking to be fully valued or close to it, we’re expecting some challenging times ahead.”

Top performing funds QSuper and UniSuper achieved high growth on vastly different investing portfolios, with QSuper investing in many unlisted assets such as property, infrastructure and private equity and less in listed shares.

Meanwhile UniSuper has a strong focus on listed assets, with very little invested in unlisted assets.

“This supports our assertion that there is no single best approach to investing,” Mr Mhankumar said.

Media Super was the third best performing growth fund for fiscal year 2019 with an 8.8 per cent return, followed by AustralianSuper, which returned 8.7 per cent for the year.

The super gains followed a bumpy ride for members over the year, after a 2 per cent gain in the September quarter was eroded in the December quarter when funds lost 4.7 per cent.

But funds came back in the second half of the financial year, boosted by a solid performance in June when sharemarkets in Australia and internationally rebounded.

For the past 10 years through June 30, AustralianSuper was the top performing growth fund, followed by Hostplus, UniSuper and QSuper.

According to SuperRatings, the super system has amassed an additional $1.3 trillion for members since the global financial crisis.

“Members should enjoy the strength of returns we’ve seen over the past decade, but as more and more workers enter and exit the system, it’s important that we keep talking about how funds manage market pullbacks and other risks for their members,” said SuperRatings executive director Kirby Rappell.

“The uncertainty that many consumers and investors feel at the moment reminds us that super is a long-term game, and members must have an understanding of both risk and return, and the effect they have on their retirement savings.”