Superannuation reverses losses with strong 2023 returns

Super funds have delivered a strong 2023 calendar year result, bolstered by strong international share markets, particularly the tech sector.

The median growth fund (61 per cent to 80 per cent in growth assets) was up 9.9 per cent while the balanced fund (41 per cent to 60 per cent in growth assets) was up 8.1 per cent, according to research house Chant West.

Meanwhile, the high growth fund (81 per cent to 95 per cent in growth assets) saw double-digit returns of 11.4 per cent, and the conservative fund (21 per cent to 40 per cent in growth assets) delivered 6.2 per cent.

According to Mano Mohankumar, Chant West senior investment research manager, strong share markets were the main driver for these commendable results.

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“International shares was the standout asset class with a tremendous 23 per cent return over the year, led by the tech sector which benefitted from advancements in AI. While Australian shares didn’t reach the same level, it still delivered a healthy 12.1 per cent over the same period,” he said.

The better performing funds over the year were generally those that had higher allocations to shares, particularly international shares, he added.

“Bonds were back in positive territory over the year, with Australian bonds and international bonds up 5.1 per cent and 5.3 per cent, respectively.

“Cash, benefitting from the higher interest rate environment, returned 3.9 per cent,” Mohankumar said.

Additionally, infrastructure and private equity were among the strong performers delivering positive returns in 2023, while unlisted property finished in negative territory, mainly due to markdowns in the office sectors.

Mohankumar observed the performance of listed real assets was a mixed bag.

“Listed real assets were mixed, with Australian listed property and international listed property up 16.9 per cent and 7.9 per cent, respectively, while international listed infrastructure was flat over the year,” he said.

The 2023 calendar returns erased the entire 4.6 per cent loss from 2022, representing the 11th positive return in the past 12 years.

Moreover, Chant West highlighted returns were well ahead of the typical long-term returns objective of just over 6 per cent per annum.

Mohankumar termed the result a “reward” for members who maintained a long-term focus and exercised patience.

“That patience has certainly been tested at various points over the past four years, a period over which super funds’ investment portfolios have proven their resilience and robustness. They’ve shown their ability to limit the damage during periods of share market weakness, as we saw during the COVID crisis in early 2020 and again in 2022 when we saw rapidly rising inflation combatted by central banks aggressively hiking interest rates.

“At the same time, they’re able to still capture a meaningful proportion of the upswing when markets perform strongly, as we saw this past year,” he observed.