Superannuation fund returns on target for a double-digit 2024

Superannuation looks set for a sparkling year of double-digit investment gains, but experts warn anything can happen.

Good times: super’s on track for another strong year. Picture: iStock

They came tantalisingly close to delivering a 10 per cent-plus investment return in 2023, and superannuation funds today appear much better placed achieve the double-digit feat this year.

New figures from super research group Chant West show the median growth fund – with 61-80 per cent in growth assets – is up 8.6 per cent for the first nine months of 2024, boosted by a 1.2 per cent rise in September.

October has started strongly too, with Chant West estimating the median growth fund has climbed 0.8 per cent so far this month, which gives it a calendar-year-to-date return near 9.4 per cent.

Super growth funds, the default option for a majority of Australians, had an investment return of 9.9 per cent for calendar 2023 – as close as possible to double-digit without getting there.

Chant West senior investment research manager Mano Mohankumar said it was “hard to tell” whether super would go better in 2024 despite its strong first nine months, which compare favourably with the 5.2 per cent return for the corresponding nine-month period last year.

“We don’t know what’s going to happen in markets over a quarter,” Mr Mohankumar said.

“It’s a long time.

“It’s looking good, given where it is now, and even if the number remains to close to 8.6 per cent that would be considered a very good result.”

Mr Mohankumar said 2024’s strong performance so far “comes on the back of a very impressive 9.9 per cent last year”.

“September was very good – you wouldn’t mind 1.2 per cent every month, would you?”

Chant West says the primary drivers of growth fund performance have been Australian and international shares, with 25 per cent and 30 per cent portfolio allocations respectively for those two asset classes.

It says Australian shares returned 3.1 per cent in September and international shares rose 1.5 per cent in hedged terms, but a rising Aussie dollar turned unhedged overseas returns to a negative 0.5 per cent for the month.

Australian bonds rose 0.3 per cent and international bonds rose 1.1 per cent.

“In September, share markets globally benefited from the US Federal Reserve officially cutting interest rates for the first time since March 2020, with more to come,” Mr Mohankumar said.

“While a reduction was largely already priced into markets, the 50-basis point cut was larger than usual. Markets were also boosted by China announcing a raft of stimulus measures to lift economic growth and support its struggling property market.

Mano Mohankumar, senior investment research manager at Chant West. Picture: Supplied

“Emerging markets shares outperformed developed markets returning 4.3 per cent, led by China.”

Fellow superannuation research group SuperRatings last week reported a similarly strong September, with default balanced superannuation options returning 1.1 per cent and median growth options up 1.3 per cent.

It said median balanced options enjoyed their strongest September quarter since 2013, but SuperRatings executive director Kirby Rappell said global tensions were rising “and there is plenty of opportunity for members to see their balance go up and down over the coming months”.

“With the escalation of conflicts in the Middle East and a close race in the US presidential election, the path for super fund returns remains uncertain,” he said.