Many retirees have received the perfect early Christmas present with news that super funds could finish the year in double-digit returns territory.
Research, data insights and technology company Chant West says funds received a lift from positive global share markets in October and now have a good chance of finishing the calendar year in double digits.
The median growth fund (61 to 80 per cent in growth assets) is up 0.4 per cent for the month, pushing the return for the first 10 months of 2019 to an impressive 12.8 per cent. Midway through November, that figure had increased further to an estimated 14.3 per cent.
Chant West senior investment research manager Mano Mohankumar says: “It has been a terrific year for super funds with a double-digit return on the cards for the median growth fund.
“That’s the category in which most Australians have their money invested.”
Mr Mohankumar says the performance so far is significantly better than what could have been expected at the start of the year.
“It’s certainly a major turnaround from the December 2018 quarter when growth funds lost 4.6 per cent and investor sentiment was decidedly negative,” he says.
“Even if super fund performance retreats in the remaining … weeks of the year, a positive return for the year would represent the 10th positive calendar year in the past eleven.”
While Mr Mohankumar says the projections are great news for super fund members, he urges caution.
“The returns that funds have delivered since the end of the GFC (global financial crisis) really aren’t sustainable over the long term, and we expect more challenging times ahead.
“Given the tremendous run investment markets have had for over a decade, most asset sectors are fully valued or close to it.
“The global economic backdrop is still dogged by uncertainty. While there have been signs of progress in trade negotiations between the US and China, those tensions still remain unresolved and could quite easily escalate again.
“There is also the ongoing concern over the pace of global economic growth and, while central banks remain supportive, doubts are being raised about how effective they can be from here on as global growth inexorably slows.
“Finally, of course, we have the unresolved matter of Brexit and how that will play out.”
He says, however, that Australians should take comfort that their superannuation is generally invested in well-diversified portfolios with investments spread across a wide range of asset sectors.
He says the typical growth fund has more resilience built in than it did a decade ago, so is better positioned to weather a period of investment market weakness if that eventuates.
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Are you approaching 2020 with caution as Chant West cautions?
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