Compare the Pair: Super fund returns
Super fund returns for the year ended June 2024 have been released, with some surprising results. Market darlings, Australian Super and CBus have underperformed, while out-of-favour retail funds, AMP and Colonial First State topped the charts.
So, what’s behind the performance results and what can retiree investors learn from them?
Surprising results
For close to two decades now, the industry funds have outperformed retail funds. But not this year. Australian Super’s default Mysuper option and managed only 8.5% for the 12 months ended June 2024.
According to SuperRatings, the median balanced super fund returned 8.8% for the financial year, up from 8.5% last year.
The industry funds were weighed down by heavy exposure to unlisted assets, particularly commercial property. Construction industry super fund, Cbus’ heavy exposure to unlisted property, dragged its returns down to 8.4%. Supply is outstripping demand for commercial property with structural changes to the workforce. Covid showed us that we don’t need to be in an office full-time to get work done. Greater regulatory scrutiny requiring funds to be more transparent with their valuations no doubt added to the burden.
Importance of international exposure
Meanwhile, retail funds benefited from their exposure to international markets, with technology and healthcare stocks performing particularly well.
Global equities were a key driver of returns. The Australian share market returned just 7.8% in the financial year, while the US market performed at 22.7% in the same period.
Heavy exposure to global equity markets, pushed Colonial First State’s and AMP’s financial year returns up to 12.1% and 11.1% in their default MySuper options, respectively.
But this success wasn’t just contained to the retail funds with some industry funds benefiting from high international exposure as well. The Australian Retirement Trust delivered 11.3% growth in its default option, while Aware Super was close behind with 11% returns. UniSuper also performed strongly with above median returns of 9.24%.
Lesson for retirees
So, what can retirees learn from all of this? It pays to keep a balanced portfolio. The Australian share market represents 2% of stocks worldwide, so limiting exposure to the domestic market, doesn’t make sense. The home country bias convinces investors that it’s safer to invest domestically rather than abroad but that’s simply not the case. And last financial year showed us that there can be performance benefits to boot.
If you’d like to learn more about how to invest for strong returns, while managing risk, give us a call. We would love to help.
This article is general and does not consider your personal circumstances so it may not be appropriate to you. If you would like advice specific to you, please let us know at daniel@danielcrumpfp.com.au
