Australia’s superannuation industry recovered in 2019 with the global equity market, posting the biggest return since 2013.

The median growth fund, where the bulk of Australian super assets are allocated, returned 14.5 per cent for the calendar year, according to an estimate compiled by Chant West. A 24 per cent rally for domestic equities in 2019 and a gain of as much as 27 per cent in international shares boosted the results.

“Fund members will have every reason to be delighted when they see their end-December balances,” said Chant West senior investment research manager Mano Mohankumar. “It’s a much better result than what we could have expected at the start of the year and a major turnaround from a year ago.”

The results come as the prudential regulator increases its focus on fund performance after publicly shaming the laggards of the industry when it published the results of its heatmaps last month. A 2 per cent decline for the benchmark ASX 300 Index in December shaved off some of last year’s return for the industry which has the highest allocation to equities among the world’s seven largest pension fund markets.

Chant West’s Mohankumar warned that while results in Australia were a marked improvement on 2018 where growth funds were down 4.6 percent in the final quarter, the results were not sustainable over the longer term. He said investors should expect more “modest” returns in the future.

“With record low interest rates and low inflation, asset prices have risen to levels that are at or approaching full valuation,” he said. “There’s ongoing concern about the slowing of economic growth and what central banks have left in their armouries to counter it.”

Despite the risks, Mohankumar said the typical growth fund, which has between 61 per cent to 80 per cent allocated to growth assets, were much more resilient than a decade ago and better positioned to withstand a selloff in the market.

Sarah Jones is the deputy editor of Investment Magazine. She previously worked for Bloomberg News in London for more than 12 years covering equity markets and global asset management. Prior to moving to the UK, she worked for Australian Associated Press in Sydney covering economics and monetary policy.
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