Super extends gains

The Victorian lockdown to control the spread of COVID-19 has had little impact on the continuing recovery of superannuation funds, as they continued their bright start to the new financial year throughout August.

Funds posted their fifth consecutive month of gains amid signs of economic recovery in the September quarter.

According to research house Chant West, the median growth fund returned 1.7 per cent in August bringing the return for the first two months of this financial year to 2.7 per cent.

The figures from rival research company SuperRatings, showed similar but slightly better results with the median growth fund returning 1.8 per cent in August, and the financial year to date growing to 2.9 per cent.

Market stability and continued momentum in shares helped to bolster account balances in August.

However, while consumers and investors are looking ahead to a ‘COVID normal’ world, the recovery is highly dependent on infection rates and the gradual easing of restrictions across the country, explained SuperRatings executive director Kirby Rappell.

Global COVID-19 cases passed the 30 million milestone on Friday and Mr Rappell said that investors should be wary of further volatility as the pandemic rolls on.

“Australia has navigated the pandemic incredibly well compared to other countries, which has helped boost confidence locally,” he said.

“Two key contributors are the relative success of Australian governments in managing the pandemic, and the stability that superannuation provides to our economy and financial system.

“The theme for the second half of 2020 will hopefully be one of continued recovery, however this will likely be unevenly spread across markets and regions.

“The harsher lockdown conditions in Victoria will have a significant impact on long-term growth, and we expect more ups and downs in the market as the outlook evolves.”

Chant West senior researcher Mano Mohankumar said while the August results were impressive, there were gloomy signs on the horizon.

“Over the first half of September we’ve seen signs of that rally wavering along with increased volatility, which doesn’t come as a surprise given the level of economic and political uncertainty,” Mr Mohankumar said.

“The global economy is in recession, but we don’t know what pattern the downturn and eventual recovery will take.

“Trade tensions between the US and China continue to escalate and, of course, we have the US election less than seven weeks away. Meanwhile in Europe the final Brexit arrangements are still up in the air.

“Despite these concerns, super fund members should take comfort in that fact that their funds generally run well-diversified portfolios that have proved to be resilient in the face of external shocks.”

According to SuperRatings’ data, the rolling one-year return for the median balanced option moved back into positive territory, recording an estimated 0.8 per cent growth to the end of August, but remains down 2.4 per cent on the start of 2020.

Both the growth and capital stable options are estimated to have gained 0.7 per cent over the year to August.

Pension returns have fared modestly better over the past year. The median balanced pension option is estimated to have risen 0.9 per cent over the 12 months to August, while the growth option is estimated to have risen 1.0 per cent and the capital stable option 0.9 per cent.

How did your super fund perform in August? Are you surprised at superannuation’s resilience through this turbulent time?

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Written by Ben Hocking

Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.

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