‘Astonishing result’: How super funds are faring amid Trump tariff volatility
By Frances Howe
One week out from the end of the financial year, analysts are predicting a strong annual performance for superannuation funds despite a year of market volatility caused by President Donald Trump’s trade war and escalating conflict in the Middle East, including US involvement in Iran.
Analysts from Chant West and SuperRatings predict Australian super funds, which manage a combined $4.2 trillion of members’ money, are set to record positive returns for the 2024-25 financial year, the third year of growth in a row.
The typical “growth” super option is on track for returns of about 9 per cent this financial year, despite market volatility.Credit: Dominic Lorrimer
Chant West has forecast that the median growth fund return for the year ending June 30 will be about 9 per cent, which is consistent with 9.1 per cent and 9.2 per cent for the financial years before this one. Figures from May showed returns were 2.7 per cent for that month.
Chant West senior investment research manager Mano Mohankumar said the predicted results were a welcome surprise, given it has been a volatile year on financial markets.
“A final return close to 9 per cent would be an astonishing result in light of the volatility we’ve seen this past year. The [2024-45 financial year] experience highlights the importance of remaining patient and not getting distracted by short-term noise,” Mohankumar said.
Although super funds are performing within their typical long-term risk objectives of one year of negative returns in every five years on average (instead, there has been one every 6.4 years), global events causing market volatility have harmed super fund performance in the past. Examples include negative returns in 2008 and 2009 due to the global financial crisis and in 2020 due to the COVID-19 pandemic.
Major super funds, which are heavily invested in shares, were hit hard when markets tanked in April in response to Trump’s “Liberation Day” tariffs. But markets have recovered since then in response to Trump pausing his plans.
The ASX 200 is up almost 10 per cent in the past year and Wall Street’s S&P500 has risen 9.5 per cent. Even so, analysts have predicted more volatility ahead due to uncertainty over Trump’s policies and geopolitical risks, including the escalating conflict in the Middle East.
AMP’s head of investment strategy and chief economist, Shane Oliver, said local investors would be waiting to see how Iran responds to US bombing in the country on Sunday (AEST).
“Ultimately, it all depends on how Iran responds. There’s a tendency to assume that any military operation in the Middle East is disastrous for share markets. Oil surges – and that’s bad news for super funds – but historically, it’s never been that clear,” Oliver said.
“If Iran retaliates by attempting to disrupt the supply of ships through the Strait of Hormuz or attacks other oil producers in the region, then oil prices could push through $US100 a barrel and you’d see very sharp falls in share markets in the next few days.”
On the other hand, if Iran agrees to Trump’s demands, then markets should settle after an initial dip, although disruptions to shipping could see negative impacts on markets for weeks or months, Oliver predicts.
Big super funds are major investors in the US, and last week the $240.8 billion Future Fund warned the US had become a riskier investment destination and is likely to attract a smaller share of global capital flows.
In a speech delivered to the American Chamber of Commerce in Australia earlier this month, the chair of the Australian Securities and Investments Commission, Joe Longo, highlighted the significant exposure of super funds to American assets including infrastructure projects, data centres and the US energy and technology sectors.
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