Chant West predicts double-digit returns for growth-focused super funds

With the market up more than 20pc, what returns can growth-focused superannuation funds expect?

With just two weeks of the year remaining, Chant West says the median growth fund is likely to notch a ‘very impressive’ 14.5 per cent return for the year.

The market’s biggest rise since 2009 is set to deliver bumper double-digit returns to Australian superannuation funds, according to super tracker Chant West.

With just two weeks of the year remaining, the group says the median growth fund is likely to notch a “very impressive” 14.5 per cent return for the year.

That’s if markets can maintain the recent momentum, and hold back from any sell-off similar to the one that wiped out almost all of super returns last year.

At the end of November, the median growth fund – with 61 per cent to 80 per cent in growth assets and in which most Australians are invested - rose by 1.9 per cent, pushing returns for the first 11 months to 14.4 per cent.

In comparison, the local benchmark is higher by 21.2 per cent for the same period.

Senior investment research manager Mano Mohankumar described the result as “tremendous”, reflecting on the stock drop at the end of 2018 that pushed annual returns to the lowest since 2011 at 0.8 per cent.

“That’s a much better result than what we could have expected at the start of the year and a major turnaround from a year ago when growth funds lost 4.6 per cent in the December 2018 quarter and investor sentiment was decidedly negative,” he said.

“This year’s return will also be the 10th positive calendar year in the past 11, which in itself is quite an achievement.”

Chant West’s fund comparison shows those on a more conservative path, with 21 per cent to 40 per cent in growth assets, had a 0.8 per cent boost in November, to an 8 per cent return for the calendar year to date.

An all growth portfolio was the closest to matching gains on the benchmark, with returns of 21.1 per cent for the year at the end of November.

Mr Mohankumar cautioned that the strong returns of the recent years weren’t sustainable in the long-run and that investors should expect more modest returns ahead.

“With record low interest rates and low inflation, asset prices have risen to levels that are at or approaching full valuation,” he added, noting that typical growth funds have more resilience built into their portfolios than a decade ago.

“There’s ongoing concern about the slowing of global economic growth and what central banks have left in their armouries to counter it. The other major uncertainty, of course, is trade relations between the US and China. While there has been some limited progress in the past month, the underlying tensions remain unresolved and could quite easily resurface.”