While the financial year got off to a good start for super fund returns, the three-year numbers are still negative and growth fund options need a further 13 per cent gain to get back to pre-financial crisis levels, according to the latest Chant West survey.

The Chant West report notes that while super funds have fallen short of their typical strategy objectives over the past 10 years, those numbers are likely to improve and different measurement periods – say, seven or 15 years – show the objectives being met.

The typical long-term strategy for a growth fund is CPI plus 3.5 per cent after fees and tax. The Chant West survey, however, shows the median return for all growth funds as only 3.4 per cent a year for the 10 years to July. Conservative fund options have done best, with a median of 5 per cent over the 10 years, which illustrates how unusual the decade has been.

Warrant Chant, the research firm’s principal, points out that the 10-year numbers will improve when the impact of the tech-wreck of 2001 drop out of the calculation period.

“This serves as a reminder to members that, even when focusing on longer-term performance, they need to be aware of market cycles,” he said. “That’s why funds set their strategy objectives over rolling periods.”

The survey also shows that volatility for funds in the past year has been at a 10-year high. The rolling standard deviation for growth fund options in the year to June was 8.1 per cent, against the previous peak of 6.9 per cent in 2001.

Industry funds have maintained their lead over master trusts for returns in the longer measurement periods, but this situation has reversed sharply in the recent 12 months. Industry funds averaged 5.6 per cent over 10 years, 4.1 per cent over five years, minus 2.2 per cent over three and 8.1 per cent over one year. Master trusts averaged 4.3 per cent over 20 years, 3 per cent over five years, minus 3.3 per cent over three and 9.8 per cent over one year.

The recent form reversal is primarily due to the higher allocations to alternatives and unlisted assets by industry funds, but also may reflect a reduction in the cost structure for some master trusts.

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