Super funds eye 6.5% return in 2023, despite a rocky start

By Newsdesk

November 21 2023
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As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows.

Super funds eye 6.5% return in 2023, despite a rocky start

Anticipation is in the air, with expectations leaning toward a 6.5 per cent return from the median growth super fund, which is characterized by a portfolio consisting of 61 to 80 per cent in growth assets, by the close of 2023.

The journey throughout the year has been anything but smooth, with the median growth fund having amassed a 3.7 per cent return since January, and a 4.3 per cent increase over the past twelve months. This is a reflection of the tumultuous financial waters navigated by investors this year.

There's news for risk-tolerant investors as well, with high growth options, boasting 81 to 95 per cent growth assets, having surged 4.6 per cent within the calendar year thus far, and an encouraging 5.2 per cent within the last twelve months. Meanwhile, those who lean towards the more conservative balanced options, with 41 to 60 per cent in growth assets, have seen growth of 3.1 per cent and 3.7 per cent respectively.

However, not all that glitters is gold, as the recent past has been marked by a dip in fortunes. In October alone, the median growth option took a 1.5 per cent hit. The sector suffered for the second successive month following a 1.9 per cent decline in September, and it's been a challenging new financial year since July 1, 2023, with all investment options experiencing setbacks.

Chant West's senior investment research manager, Mano Mohankumar, provided insight into the forces at play during this period, stating: “The tragic events in the Middle East also weighed on markets in October. Over the month, Australian shares fell 3.8 per cent while developed market international shares fell 2.6 per cent in hedged terms."

He added, “However, the depreciation of the Australian dollar against all major currencies reduced the loss in unhedged terms to just -1 per cent and super funds, on average, have about 70 per cent of their international shares exposure unhedged. Emerging markets shares were down 2 per cent for the month. Australian bonds fell 1.8 per cent while international bonds fell 0.8 per cent, as bond yields rose again during October.”

These insights demonstrate a complex landscape for superannuation funds, affected by global events and market volatility. Despite the recent downturns, Chant West's expectations for the year-end bring a glimmer of hope to superannuation members, eager to see how their funds will fare as 2023 unfolds.

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