Industry super funds continue to outperform as rising stocks buoy gains

Superannuation funds have recorded a strong start to the financial year, on average posting a 3% rise in July alone, according to superannuation research firm SuperRatings.

This brings the yearly gains for balanced super funds to 17%, which is the highest yearly return since the global financial crisis.

As has been the case for several years, the strongest gains were in industry super funds, which on average delivered 1.83% more per year over the past 10 years.

SuperRatings research manager Kirby Rappell told SmartCompany that while all asset classes had risen in July, the largest factor in the result was the rise in local and international shares.

“There was a strong bounce in Australian shares over the period,” he said. Australian shares rose 4.8% in June and generally comprise around 30% of most balanced superannuation funds.

International shares, which normally account for 25% of super fund investments, also posted strong returns, which were accented by the fall in the Australian dollar.

Asked what investors can expect in the future, Rappell declined to make a prediction, but did say it was important to focus on long-term objectives.

“Most funds try to return a figure every year that’s the consumer price index, which measures inflation, plus around 3.5%. So they’re all about the long term. And since the introduction of the superannuation guarantee in 1992, most super funds continue to do better on that long-term objective than that minimum goal.”

The best-performing funds were industry super funds, which delivered, on average, 1.83% more over the past 10 years to July 31 than commercial retail master trusts, which are typically owned by the big banks.

Over the past year, industry funds delivered 17.17% return on average, while retail master trusts delivered a slightly lower 16.70% on average.

“One of the defining features of industry super funds is the representative trustee model, which is a great example of consensus between employer and employee representatives,” Industry Super Network chief executive David Whiteley said.

“The combination of this model, the strong investment in infrastructure by industry super funds, and a run-only-to-benefit-member’s philosophy is delivering better outcomes for industry super fund members.”