Super returns rise but ‘bumpy’ months ahead

Energy and commodities helped boost super fund returns in July, with modest sharemarket returns, but inflationary impacts lie ahead.

Super fund returns continue to rise, although the impact of inflation means there will be “bumpy” months ahead in the short term, according to research house SuperRatings.

The median balanced option in super funds returned 1.5 per cent in July, SuperRatings estimates.

SuperRatings executive director Kirby Rappell said funds continued to build on the momentum seen in markets over the June quarter.

“The impact of inflation continues to drive markets with most Australian and global equities delivering modest returns, while energy and commodities performed well over July,” Mr Rappell said.

Kirby Rappell. Picture: Supplied.

“We expect returns will remain bumpy over the short term, despite the Reserve Bank of Australia taking a wait-and-see approach in both July and August following indications that the tightening cycle is beginning to have a clearer impact on spending and consumption.”

July’s 1.5 per cent increase for balanced options, where a fund has 60-76 per cent of the portfolio invested in growth assets, took the return over the past year to 7.2 per cent.

The median growth option, with 77-90 per cent invested in growth assets, rose by an estimated 1.8 per cent in July, and by 9.2 per cent over the past 12 months.

The median capital stable option (20-40 per cent in growth assets) had a small positive result of 0.8 per cent in July, and a 3.6 per cent gain over the year to July.

The July results build on the positive returns achieved in the 2023 financial year, when international shares drove super fund returns on the back of a strong rebound on sharemarkets.

“Funds have had a strong finish to FY23 with the median balanced fund returning 9.1 per cent over the year to June and it is pleasing to see funds maintaining that momentum into the first month of FY24,” Mr Rappell said.

Pension returns also increased in July, with the median balanced pension option gaining an estimated 1.7 per cent.

SuperRatings estimated the median growth pension option gain at 2.0 per cent, while the more defensive median capital stable pension option delivered a 0.9 per cent return in July.