super getting strong - 2023 fund earnings

Staying the course has long been the preferred option for superstar investors like Warren Buffet and Vanguard founder, Jack Bogle. What does this mean? It means taking a long term perspective on your investments. This can be easier said than done during a year like 2023 when international conflicts, rising inflation and central bank uncertainty led to increasing volatility in money markets across the globe.

But those who held their nerve and did take a longer term perspective are being rewarded when it comes to super fund returns. This is reflected in the most recent update from SuperRatings which summarises Australian super fund returns across calendar year 2023. No matter which way you view these results, it underlines the fact that superannuation remains a solid investment which has performed well across the years. Here’s a quick summary of SuperRatings update.

Overall performance

A quick explanation of the table

Balanced options have 60 -76% of their investment in what are known as growth assets such as domestic and international equities (or shares) and property.  The rest is in defensive assets such as cash and fixed interest.  The capital stable options in this table have only 20-40% in growth assets while the growth options have 77-90% in growth assets.  

The median balanced option showed a 9.6% return for the full 2023 calendar year. This comes after a 4.8% loss for calendar year 2022, so it’s quite a remarkable turnaround. 

What about growth and capital stable options ?

As shown in the above table, the median growth option returned 11% across the year. The median capital stable option was well behind at 6.5%.

How did pension funds perform?

Even more strongly than accumulation funds! The returns for the balanced pension funds (those which are in decumulation mode) 10.9% for the calendar year and 7.5% over the past 10 years.

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Why are returns so strong?

Says Joshua Lowen, Insights Manager, SuperRatings,

‘International shares are the standout performer over the year, with strong growth in technology shares a major factor. These returns were also supported by Australian shares as well as rising cash rates and improving fixed interest and cash returns.

2023 has been a strong year for funds, and rising cash rates will be a relief for retirees needing to access their super; however, inflation remains higher than cash returns and balances are likely to bounce around over the coming year. Even in retirement, superannuation needs to last for the long term, and staying focused on your strategy is key to maximising your chances of success.’

How do returns in super compare to those in cash?

The following chart says it all, really.

This shows an investment of $100,000 in a median balanced option fund over ten years now being worth $189,005. If invested in a median growth option fund it would be worth $201,539. The same amount invested in cash would be worth %117,637.

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Which funds performed the best?

The following table lists the top 20 balanced options funds for 2023.

What about longer term fund performance?

And here are the top 20 funds over the 10 years to 31 December 2023

How do these returns affect you?

Frequently reviewing your investment settings is a smart strategy. Many retirees can automatically default to conservative settings, without actively thinking about it, even though they may have 20 or more years expected lifespan in retirement. At the risk of stating the obvious, even a small change in such settings can translate to higher income. If we look at the chart showing returns on $100,000 over ten years, the return on growth against balanced was $22,000+ higher. A handy bonus for retirees who could do with some extra discretionary spending power.

If you feel you might benefit from reviewing your own super investment settings, it could help to talk to a Retirement Essentials adviser and do some scenario comparisons using the Retirement Forecaster tool.

How did your fund perform last year? If it’s not listed above, you may wish to check the calendar year returns directly with your fund and then compare these results with the median performances above.

What’s your view?

Are you, too, a fan of ‘staying the course’?
Or is this easier said than done once you hit retirement?
We’d love to hear your thoughts.

This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.