The majority of Australians have their retirement savings invested in a growth fund, Chant West said.

The research firm’s senior investment research manager, Mano Mohankumar, said the figures “would have been inconceivable a year ago” after the “financial disruption” caused by COVID-19.

Even the worst-performing growth fund delivered a return of 13 per cent, which would have made it the top performer in the 2019-20 financial year, when most growth funds posted a loss as equity markets plunged alongside the onset of the pandemic.

But MLC Asset Management chief investment officer Jonathan Armitage said it was “unlikely” the super sector would repeat its record performance in the current financial year, with valuations in pockets of the market like technology stocks looking stretched.

“Having said that, you’re still seeing recoveries and economic growth, particularly in the US and also in Europe as well. The momentum from an earnings perspective continues to be strong,” he added.

Chant West’s Mr Mohankumar said the top funds over the past year had higher allocations to listed shares.

“Australian shares gained an impressive 28.5 per cent while international shares surged 37.1 per cent in hedged terms,” he said.

Long-term performance

The weakest-performing asset classes during the financial year were bonds and cash.

“Cash was virtually flat with a return of just 0.1 per cent while Australian and international bonds fell 0.8 per cent and 0.2 per cent, respectively,” said Mr Mohankumar.

While retail funds performed well during the last financial year, only one for-profit fund – Australian Ethical Super Balanced – made the the top-10 list when performance was compared over the past decade.

Industry funds AustralianSuper and Hostplus were the top-performing growth funds over the past 10 years, said Chant West, delivering returns of 9.7 per cent to their members.

The next best-performing growth funds were Cbus’ default MySuper product, and both UniSuper and CareSuper’s balanced offering.

Mr Mohankumar said the “typical” long-term return objective for growth funds was to achieve returns at least 3.5 per cent above inflation annually, but the results achieved over the past few decades had been “well above” target.

“We now have data going back 29 years to July 1992, the start of compulsory super. Over that period, the annualised return is 8.2 per cent and the annual CPI increase is 2.4 per cent, giving a real return of 5.8 per cent per annum,” he said.

The top-10 performing funds all delivered annual returns in excess of 9 per cent over the past decade.

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