Super funds claw back most of losses since March Covid crash

Eight months after markets plunged, super funds have posted a positive return in September quarter and are up 2.5pc in October.

Growth funds posted a positive return in the September quarter and are up 2.5 per cent October to date.

Nearly eight months after the COVID-19 crisis sent markets into a tailspin, super funds have clawed back nearly all of the losses, posting a positive return in the September quarter and climbing a further 2.5 per cent in the first half of October, according to Chant West.

The median growth fund gained 2 per cent through the quarter despite a slight retreat in September that delivered the first negative monthly result since March, according to the research house.

The quarterly gain, combined with the strong return for the June quarter and the October lift, has seen super fund growth options deliver an 11.5 per cent return, just shy of the double-digit losses suffered at the start of the year.

“Growth funds have now erased most of the 12 per cent loss experienced back in February and March. That’s despite the uncertain global economic and political backdrop,” Chant West senior investment research manager Mano Mohankumar said.

“The global economy is in recession but we don’t know what pattern the downturn and eventual recovery will take. Trade tensions with China keep simmering in the background but, more immediately, all eyes will be on the upcoming US election which is only two weeks away.”

The positive return over the September quarter was driven mainly by international shares, which returned 6.9 per cent in hedged terms, he said.

“However, the appreciation of the Australian dollar (up from $US69c to $US72c) reduced that gain to 3.8 per cent in unhedged terms.

“While global shares were up overall, there was a lot of divergence between regions with the US and Asian markets forging ahead of Europe and the UK. Australian shares were flat, with a return of -0.1 per cent over the period.”

Growth funds returned -0.6 per cent for September, while balanced funds declined 0.4 per cent.

“Share markets wobbled a little in September after rallying strongly for the previous five months. But again we saw the value of diversification come to the fore – just as we did during the market crisis in February and March,” Mr Mohankumar said.

“Australian and hedged international shares were down 3.6 per cent and 2.9 per cent respectively for the month, but by having exposure to a wide range of growth and defensive asset sectors the median growth fund was able to contain the loss to just 0.6 per cent.

Growth funds were up 2 per cent year-to-date as at the end of September, while balanced funds were up slightly less at 1.7 per cent.