‘Staggering’ tech returns to lift super balances 8.8pc

Technology stocks abroad soared in the first half of 2023 thanks to advancements in artificial intelligence, with many retaining this growth throughout the rest of the year.

“At a time when many Australians are feeling financial stress due to high inflation and high interest rates, the better-than-expected calendar year return will provide some good news,” Mr Mohankumar said.

“It’s a reward for super fund members who have remained patient and maintained a long-term focus.”

Super fund CIOs previously pointed to international tech stocks as their biggest source of returns last financial year and the top performing funds over that period were those with the highest exposure to these assets, such as Mine Super, UniSuper and the Australian Retirement Trust.

Australian equities also delivered strong returns of 9.5 per cent over the calendar year to date, making a “solid” contribution to the funds’ returns.

Looking at November specifically, strong performances from share and bond markets drove the median return of 3.1 per cent for growth funds.

“[This] was largely on the back of slowing inflation in the US and other regions, which further raised hope that interest rates may have reached their peak,” Mr Mohankumar said.

Local shares soared 5.1 per cent for the month and international equities jumped 8.4 per cent in hedged terms, though the poor Australian dollar dragged that return to 4.4 per cent in unhedged terms.

Australian and international bonds returned 3 per cent and 3.2 per cent respectively as bond yields fell sharply.

Volatile 2024

Mr Mohankumar said the projected 2023 results were “excellent under challenging circumstances”, but warned the tricky investment conditions were set to stay into 2024.

“Market volatility is unlikely to disappear given the uncertain backdrop, with signs of slowing economic growth in the US, stubborn services inflation and geopolitical risks,” he said.

Super fund customers could “take comfort” in the fact that most funds were well-diversified across a wide range of asset classes, however, which would hopefully help deliver smoother returns.

In 2022’s sharemarket volatility the best performers were those with high exposure to unlisted assets, for example, which helped cushion customers from crashing equities prices. That reversed this year, as unlisted real estate valuations dropped and shares soared.

As super funds focus on longer-term horizons, however, these typically balance out to returns in line with or above their investment targets. The 10-year performance of growth funds, which is what most default MySuper options are, was 6.9 per cent for the decade to November 30, several percentage points above most funds’ targets.

Looking at the calendar year to date, Chant West found that growth funds returned 6.9 per cent while high growth (those with 81-95 per cent of funds in growth assets) returned 8.1 per cent, balanced (41-60 per cent) returned 5.7 per cent and conservative (21-40 per cent) returned 4.4 per cent.