Super funds on track for bumper returns as industry funds dominate again

The Australian

June 19 2018

James Kirby – Wealth Editor

Super funds are heading for another bumper year with industry funds emerging once more as the top performers, says researcher Chant West.

With just two weeks to ago before funds close their books for the financial year, the researcher estimates the median return for growth funds (the most popular fund type among all working Australians) will be about 9.3 per cent this year. (Funds are already reporting 8 per cent to the end of May and strong markets in the last few weeks are pushing final figures higher).

A recent report from the Productivity Commission into super showed average funds over the long term can only be expected to bring in around 5.6 per cent: “When you look at the last few years, you have to say it’s been an exceptional run for super, especially industry funds where the best funds could be bringing in 10 per cent this year,” says Mano Mohankumar Chant West’s senior investment research manager.

With trade union-linked industry funds beating retail funds (from banks and insurers) over many years, Mohankumar points to the different style of investing favoured by industry funds for their success. Non-profit industry funds have less emphasis on bonds and shares and more emphasis on so-called unlisted investments such as direct holdings in property, infrastructure and private equity than their for-profit rivals.

The Chant West report focuses on the performance of specific fund options at fund managers rather than the wider “aggregated” combined performance of fund managers favoured by APRA.

However, the broad results are very similar, with industry funds dominating the very top of the tables. Likewise, leading funds that come up trumps in APRA’s statistics also dominate the Chant West figures, which placed Hostplus as the best performer for the year to May returning 10.3 per cent: In March, Hostplus also topped the APRA survey of last year’s top funds when it recorded 12.2 per cent in the year to June 2017. Other funds at the top of the latest list include regular outperformers such as AustralianSuper, CBUS, FirstState and Sunsuper.

Though there has been a perennial problem in comparing super fund performance, a string of key reports in recent months have improved transparency in the sector. The Productivity Commission survey discovered that one in four funds were underperforming the industry.

As workers and investors become more informed on super performance there is a strong chance that there will be more switching between funds. Manokumar says people should make sure of their numbers before making big decisions. “If your fund is not doing as well as the best in the sector over one year that is one thing, but if it is falling behind the pace over, say, seven years, then for many people that would mean it is time to review … that’s a full investment cycle,” he explains.