The 2019/20 financial year was a year of extreme volatility in three parts. In the first half year super funds rode the booming markets to their peak before falling off a COVID-linked cliff in February. Then, against all expectations, market staged a surprising partial rebound to finish the year near where they began.
According to research company Chant West, the median Growth fund finished the financial year down -0.5%, with many funds managing to post a modest positive return.
Note: Growth funds have a 61-80% allocation to growth assets and are the investment option that most Australians are invested in.
Chant West senior investment manager, Mano Mohankumar says: “While the end result was marginally negative, that still represents an excellent outcome given the economic damage wrought by the COVID-19 pandemic in Australia and globally. And it’s important to remember that funds had enjoyed an unprecedented run for almost 11 years through to early 2020.
“Even taking this year’s result into consideration, Growth funds have returned an impressive 8.3% per annum since the GFC low point in early 2009. That’s well ahead of their typical return objective which equates to about 5.6% per annum.”
Returns are important but so is risk, and most funds also set themselves a risk objective. Risk is normally expressed as the chance of a negative return, and typically a growth fund would aim to post no more than one negative return in five years on average. This past year’s negative return, the fourth in 28 years, equates to one negative return every seven years on average.
The table and chart below show the annual financial year performance of the median Growth fund over the 28 financial years since the introduction of compulsory super. It is inevitable that growth funds would have some years with negative returns. You would expect no more than five or six negative years over 28 years, but there have been only four.
Super fund performance: Financial years (1992/93 to 2019/20)
| Financial year | Return (%) |
|---|---|
| 2019/20 | -0.5% |
| 2018/19 | 7.0% |
| 2017/18 | 9.4% |
| 2016/17 | 10.8% |
| 2015/16 | 3.0% |
| 2014/15 | 9.8% |
| 2013/14 | 12.8% |
| 2012/13 | 15.6% |
| 2011/12 | 0.5% |
| 2010/11 | 9.2% |
| 2009/10 | 10.4% |
| 2008/09 | -12.9% |
| 2007/08 | -6.9% |
| 2006/07 | 15.6% |
| 2005/06 | 14.7% |
| 2004/05 | 13.1% |
| 2003/04 | 13.5% |
| 2002/03 | 0.3% |
| 2001/02 | -3.3% |
| 2000/01 | 6.0% |
| 1999/00 | 12.7% |
| 1998/99 | 8.6% |
| 1997/98 | 10.0% |
| 1996/97 | 19.4% |
| 1995/96 | 10.7% |
| 1994/95 | 7.4% |
| 1993/94 | 7.1% |
| 1992/93 | 11.4% |
Source: Chant West. Performance is shown net of investment fees and tax, and before administration and adviser commissions.
While the 2019/20 result fall short of the returns we have become accustomed to over the previous 10 years, Mano reminds fund members to think long term: “Certainly look at what your fund delivered over the year, but it’s even more important to know what its long-term objectives are and whether it’s achieving them.
“Most growth funds aim to beat inflation by 3% to 4% a year. We now have data going back to July 1992 … over that period the annualised return is 8% and the annual CPI increase is 2.4%, giving a real return of 5.6% per annum – well above that 3% to 4% target.”
The following table shows the super performance across various timeframes for five investment categories to 30 June 2020.
Super fund performance (Results to 30 June 2020)
| Fund Category | Growth Assets (%) | 1 yr (%) | 3 yrs (% per yr) | 5 yrs (% per yr) | 7 yrs (% per yr) | 10 yrs (% per yr) | 15 yrs (% per yr) |
|---|---|---|---|---|---|---|---|
| All Growth | 96-100 | -2.1 | 6.2 | 6.6 | 8.9 | 8.8 | 6.8 |
| High Growth | 81-95 | -0.9 | 5.9 | 6.7 | 8.3 | 8.4 | 6.6 |
| Growth | 61-80 | -0.5 | 5.3 | 6.2 | 7.5 | 7.7 | 6.4 |
| Balanced | 41-60 | 0.3 | 4.5 | 4.8 | 6.1 | 6.4 | 5.6 |
| Conservative | 21-40 | 1.0 | 3.8 | 4.2 | 5.0 | 5.4 | 5.0 |
Source: Chant West. Performance is shown net of investment fees and tax, and before administration and adviser commissions.
Super fund performance: Calendar years (1993 to 2019)
For your reference we have also included below the average super fund returns over 27 calendar years.
The table and chart below show the annual calendar year performance of the median Growth fund over the 27 years since the introduction of compulsory super. It is inevitable that Growth funds would have some years with negative returns, but you would expect less than six negative years over 27 years. As it happens, there have been only four.
| Calendar year | Return (%) |
|---|---|
| 2019 | 14.7% |
| 2018 | 0.8% |
| 2017 | 10.8% |
| 2016 | 7.5% |
| 2015 | 5.7% |
| 2014 | 8.5% |
| 2013 | 17.2% |
| 2012 | 12.8% |
| 2011 | -1.9% |
| 2010 | 4.7% |
| 2009 | 15.1% |
| 2008 | -21.5% |
| 2007 | 8% |
| 2006 | 13.8% |
| 2005 | 14.3% |
| 2004 | 15.5% |
| 2003 | 9.2% |
| 2002 | -4.8% |
| 2001 | 4% |
| 2000 | 7.3% |
| 1999 | 10.2% |
| 1998 | 11% |
| 1997 | 14.9% |
| 1996 | 10.8% |
| 1995 | 16.1% |
| 1994 | -3.9% |
| 1993 | 23.9% |
Source: Chant West. Performance is shown net of investment fees and tax, and before administration and adviser commissions.
The following table shows the super performance across various timeframes for five investment categories as at the end of the last calendar year.
Super fund performance (Results to 31 December 2019)
| Fund Category | Growth Assets (%) | 1 yr (%) | 3 yrs (% per yr) | 5 yrs (% per yr) | 7 yrs (% per yr) | 10 yrs (% per yr) | 15 yrs (% per yr) |
|---|---|---|---|---|---|---|---|
| All Growth | 96-100 | 20.8 | 10.9 | 9.5 | 11.4 | 8.9 | 7.7 |
| High Growth | 81-95 | 17.6 | 9.9 | 8.9 | 10.6 | 8.8 | 7.6 |
| Growth | 61-80 | 14.7 | 8.7 | 8.0 | 9.3 | 7.9 | 7.0 |
| Balanced | 41-60 | 11.4 | 6.8 | 6.2 | 7.4 | 6.6 | 6.0 |
| Conservative | 21-40 | 8.3 | 5.3 | 5.0 | 5.6 | 5.7 | 5.5 |
Source: Chant West. Performance is shown net of investment fees and tax, and before administration and adviser commissions.
