Super savers notch up 11 months of gains: Chant West

Strong Australian and international sharemarkets have delivered super savers their 11th straight month of positive returns.

Young Australians’ superannuation balances have been the biggest beneficiaries of the latest rally in shares.

The good times are continuing for Australian superannuation funds and their members, with buoyant equities markets delivering 11 straight months of positive returns.

A read on the state of superannuation by sector watchers Chant West has found August delivered a 1.7 per cent return for median growth funds.

This follows returns in July that saw a financial year-to-date return of 2.8 per cent.

The sharemarket over the same period was up 3 per cent by the end of August.

However, the market has declined somewhat since August, with the S&P/ASX 200 up 1.2 per cent by Friday’s close.

The good news for super fund members has been driven by the continued strength in shares, which have rallied strongly from the pandemic doldrums.

Since March 2020 growth funds have seen a 29 per cent improvement in performance.

The rally has been so strong that growth funds are now 14 per cent above their pre-Covid high, reached in January 2020.

Chant West senior investment research manager Mano Mohankumar said the rising returns came despite the continued disruption caused by the Covid-19 pandemic.

“In August, share markets globally were encouraged by a well-received speech from US Federal Reserve Chairman, Jerome Powell, which provided reassurance that the Fed’s policy efforts were likely to continue to support share markets,” he said.

“That overshadowed concerns in the US about the damage caused by Hurricane Ida and the increasing spread of the Covid-19 Delta variant.”

Mr Mohankumar said European earnings and the UK’s market were also able to withstand the outbreak of the Delta variant thanks, in part, to vaccine rollouts.

“During the month, the UK lifted the last of its remaining restrictions and while daily Covid case rates increased, hospitalisation rates remained stable,” he said.

However, Mr Mohankumar noted China’s market remained flat due to concerns around “increased regulation” which has seen major sell-offs in Chinese tech giants Alibaba and Tencent.

Bloomberg notes the recent sell-off in Tencent had seen the company fall out of the world’s 10 largest companies by market value, leaving no Chinese company in the list.

Alibaba fell out of the top 10 ranking earlier this year.

Mr Mohankumar said an increasing number of superannuation members are being placed into MySuper products allocated to age-based options.

Chant West notes the data showed options with higher growth assets had done the best over the periods measured.

“Younger members of retail life cycle products – those born in the 1970s, 1980s and

1990s – have outperformed the MySuper Growth median over all periods,” Chant West said.

“However, they’ve done so by taking on significantly more share market risk.”

However, Chant West stressed the less impressive returns for older customers were to be expected given their portfolios were tailored at asset preservation ahead of retirement.

Originally published as Super savers notch up 11 months of gains: Chant West