Super funds end year on a high
The 2023-24 financial year saw positive returns, but the regulator says the industry has a lot more to do to put members first.
Superannuation funds mostly closed the financial year with a strong performance, with May and June reversing a splutter in April.
Funds staged a huge turnaround, with the typical balanced option returning 9.6%, erasing the 4.8% loss of 2022. This marks the 13th positive return in the past 15 years.
Commentators concluded that the best performing funds were those holding US technology stocks invested in the artificial intelligence (AI) wave.
Chant West says resilient share markets, particularly international shares, were the primary driver of the healthy super fund performance.
“A final result close to 9% would be an excellent outcome, given all of the uncertainty around inflation, expectations of when the [US Federal Bank] will start cutting interest rates, and ongoing geopolitical tensions,” Chant West senior investment research manager, Mano Mohankumar, said.
“The experience over the past two years is another reminder of the importance of remaining patient and not getting distracted by shorter-term market noise.”
He said that in the aftermath of COVID-19, few would have predicted a return of 19% in the two years since June 2022.
Australian shares supported the good performance, returning 11.6%, bolstered by rising interest rates improving fixed interest and cash returns.
Cash returned 3.6% during 2023, fixed interest 4.9%, and property 7.1%.
According to SuperRatings, Hostplus Indexed Balanced was the best performing balanced investment option – with 60 to 76% invested in “growth” assets – with a return of 13.2%.
Brighter Super Optimiser Accumulation – Multi-Manager Growth Fund was next with a return of 13.1%. ESSSuper – Balanced Growth took third with a return of 12.8%.
Hostplus Balanced was the best performer over the 10 years to 31 December 2023, with an average annual compound return of 8.3%.
Second is shared by AustralianSuper Balanced and Australian Retirement Trust Super Savings Balanced, each with an average annual compound return of 7.9%.
Meanwhile, super regulators are urging funds to improve retirement outcomes for members.
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) are calling on superannuation trustees to boost efforts to track and measure the impact of their strategies.
ASIC and APRA want the industry to get on with implementing the covenant reforms and say funds’ responses point to several challenges in implementing it.
These include uncertainty around the:
- Financial advice framework
- Privacy, security, and cost concerns on collecting more member data
- Lack of member engagement and financial capability.
APRA deputy chair Margaret Cole said, “The most concerning finding from this survey is the lack of progress being made by trustees in tracking the success of their strategies, especially as this was highlighted as one of the key areas in need of improvement in the thematic review report.
“Without effective success metrics, how can trustees know that their strategies are working? Members deserve better.”
ASIC said funds have a pivotal role to play in improving retirement outcomes for their members, with about three million Australians expected to join the six million already eligible to access their superannuation savings over the coming decade.
The super funds’ peak body, the Association of Superannuation Funds of Australia (ASFA), responded to ASIC and APRA pulse check saying it was early days since the covenant was introduced and the industry had made “progress” in implementing it in the “relatively brief period since it was introduced”.
ASFA said super funds were committed to better understanding their members’ retirement needs and have made substantial investments to provide members with access to retirement-focused information.
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