Despite a minor setback in November, Australia's superannuation funds are poised to finish the year on a high note. But here's where it gets controversial: even with this small loss, the overall performance for the year is expected to be robust.
The Power of Offshore Investments
Offshore investments have been a key driver of these gains, with international share markets playing a significant role. These markets, which account for over 30% of growth fund allocations on average, have delivered impressive returns of over 17% so far this year. This positive performance, coupled with positive returns across all major asset classes, has contributed to the strong overall result.
Mr. Mano Mohankumar, head of Superannuation Investment at Chant West, emphasizes that this year's result builds on solid performances from the past two years, with gains of 9.9% in 2023 and 11.4% in 2024. He adds, "While calendar year performance is often the focus, it's crucial to remember that long-term performance is the key measure for super outcomes."
Looking at the bigger picture, Chant West notes that since the introduction of mandatory superannuation in 1992, the median growth fund has returned an impressive 8% per annum. This is well above the typical target of 3.5%, even when considering the annual consumer price index increase of 2.7% over the same period.
Even during challenging times, such as the Global Financial Crisis (GFC) in 2007-2009, the COVID-19 pandemic in 2020, and the high inflation and rising interest rates in 2022, super funds have consistently delivered returns of 7% per annum.
And this is the part most people miss: over the entire period since 1992, there have only been five negative years, which translates to less than one year in every six.
So, while the slight dip in November may be a cause for concern for some, the long-term performance of superannuation funds paints a much brighter picture.
What do you think? Is the focus on short-term losses missing the bigger, more positive picture? We'd love to hear your thoughts in the comments below!
