Super funds make promising start to year

Super funds are maintaining their momentum into 2021, returning close to 3pc by mid-February, says Chant West.

Super funds have returned close to 3 per cent since the start of the calendar year, according to Chant West.

Super funds have kept up their positive momentum in the first few weeks of 2021, returning close to 3 per cent by mid-February, according to research house Chant West.

While the median growth fund was up just 0.2 per cent in January, February has been more positive, with an estimated 2.5 per cent gain to date, Chant West senior investment research manager Mano Mohankumar said.

The median growth super fund has now returned more than 18 per cent since March last year, after the solid gains following the 2020 market crash were boosted by further positive returns in the first few weeks of 2021.

“In January, emerging markets outperformed developed markets despite a sell-off late in the month on concerns around a resurgence in COVID-19 cases,” Mr Mohankumar said.

“The US share market experienced increased volatility as a result of highly unusual and targeted trading by a segment of retail investors. This overshadowed the underlying investor optimism brought about by President Biden’s proposed stimulus plan.”

Australian shares were up 0.3 per cent over January but this was offset by the weaker performance in international stocks, which returned minus 0.2 per cent and 0.1 per cent in hedged and unhedged terms, respectively.

“Back at home, all states now have COVID case numbers largely under control – although occasional mini outbreaks, such as we’ve seen in Victoria in recent days, must still be expected,” Mr Mohankumar said.

“Earlier this month the RBA left the official cash rate unchanged at 0.10 per cent. That, together with a ‘better than expected’ start to the half-year reporting season, an uplift in employment numbers and positive commentary from the Reserve Bank, has underpinned a general improvement in corporate and consumer confidence.”

While super funds have now returned 18 per cent since the sharemarket collapse last February and March, the 30 per cent plunge caused by the COVID-19 crisis meant that for the 2020 calendar year the median growth fund returned just 3.6 per cent.

Mr Mohankumar said it was “an excellent outcome” under the circumstances.

Over the three months through January, high growth funds returned 8 per cent, growth funds gained 6.4 per cent and the median balanced fund rose 4.5 per cent, according to Chant West.

For the financial year to date, high growth funds have returned 11 per cent, compared to the growth option’s 9.4 per cent and balanced’s 6.4 per cent.

On Monday, fellow research house SuperRatings said current trends indicated the superannuation sector was “in good health and well positioned for 2021” despite the emergence of new COVID-19 variants and rolling lockdowns that have hit most Australian states in recent weeks and months.

SuperRatings chief Kirby Rappell said superannuation holders should prepare for a bumpy ride.

“Super funds have had a promising start to 2021, but the pandemic isn’t over yet,” Mr Rappell said.

“Movements in financial markets are still closely tied to how governments are managing new COVID-19 cases, as well as the timing and efficacy of vaccines. In short, we expect more ups and downs in the market, and super funds are not immune.”

Additional reporting: David Ross