Market volatility in October has seemingly failed to dampen super’s strong momentum, with the growth median currently sitting at a “healthy” double-digit return of 10.3 per cent, according to Chant West.
Super funds were flat in October, with the median growth fund (61 to 80 per cent in growth assets) up 0.1 per cent for the month.
Meanwhile, the high growth option (81 to 95 per cent in growth assets) and all growth (96 to 100 per cent in growth assets) rose 0.4 per cent and 0.5 per cent, respectively.
Conversely, the conservative option (21-40 per cent in growth assets) saw negative returns, dipping 0.3 per cent, while the balanced option (41-60 per cent in growth assets) fell 0.1 per cent.
However, Chant West observed share markets are on an upward swing in November so far, with just six weeks left of the calendar year.
According to Mano Mohankumar, senior investment research manager, a final result near that 10.3 per cent would be a “tremendous outcome”.
It remains “well ahead” of the typical long-term return objective of around 6 per cent, he pointed out.
“And super fund members shouldn’t forget that this year’s result follows the better-than-expected CY23 return of 9.9 per cent,” Mohankumar said.
“Given the strength of share markets over the past two years, super fund members in higher risk portfolios would have fared even better.”
October saw declines in both shares and bonds as markets dialled back expectations of rate cuts by the US Federal Reserve following “stronger than expected” economic data.
“At its most recent meeting in November, the Fed followed up its September 0.5 per cent interest rate cut with a less aggressive reduction of 0.25 per cent, bringing the target range to 4.5 per cent - 4.75 per cent,” Mohankumar explained.
“Also weighing on markets during the month was uncertainty leading up to the US presidential election, which we now of course know the result of.”
Despite these market fluctuations, super’s flat returns could be credited to the diversification provided by foreign currency exposure, the investment executive highlighted.
Over the month, Australian shares dipped 1.3 per cent and international shares were down 0.9 per cent in hedged terms.
“But the depreciation of the Australian dollar (down from US$0.69 to US$0.65) turned that into a healthy gain of 3.9 per cent in unhedged terms,” Mohankumar said.
On average, super funds hold 70 per cent of their international shares exposure unhedged.
Australian and international bonds had also slipped 1.9 per cent and 1.5 per cent, respectively, as bond yields rose.
