Bounce in equities buoy super
Strong growth for new year
THE good times are continuing for Australian super funds and their members, with buoyant equities markets delivering 11 straight months of positive returns.
Super research group Chant West has found August delivered a 1.7 per cent return for median growth funds.
This brings the cumulative return for the first two months of the financial year to 2.8 per cent.
The good news for super fund members has been driven by continued strength in shares, which have rallied strongly despite the pandemic doldrums. Since March 2020 growth funds have seen 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, sharemarkets 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 sharemarkets,” 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 and British earnings were also able to withstand the Delta outbreak 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 about increased regulation which have seen major selloffs in 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 earlier this year.
Mr Mohankumar said an increasing number of super fund members were being placed in MySuper products allocated to age-based options. Chant West notes that options with higher growth assets did best.
“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 sharemarket risk.”
However, Chant West stressed that less impressive returns for older customers were to be expected because their portfolios were tailored towards asset preservation.