Sally Rose Strong returns in October have placed Australian superannuation funds back on track for a fourth consecutive year of positive returns in 2015, but the super-charged returns of recent years are a thing of the past.
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Balanced funds, the growth option in which most workers have their compulsory retirement savings, returned on average 3.2 per cent in October, bringing average returns for first 10 months of the calendar year to 6.1 per cent, according to Chant West research released on Wednesday.
The bounce in October followed a volatile September quarter.
"With the end of the year in sight, there remains a good chance that the median growth fund will produce another positive calendar year return," Chant West director Warren Chant said. However, member returns for 2015 are unlikely to be as strong as those delivered over the past three years, as global markets fuelled by central bank liquidity recovered from the global financial crisis, he said.
The average return on balanced funds was 12.8 per cent in 2012, 17.2 per cent in 2013, and 8.5 per cent in 2014.
"A modest positive return for the year shouldn't come as a surprise," Mr Chant said.
"For some time, asset managers have been commenting that we're heading into a lower return environment. They believe that many asset sectors are now close to being fully valued, and they say they're finding it harder to identify future sources of growth".
Earlier this year major asset consulting firms, including Towers Watson, told Fairfax Media many super funds would need to warn members to expect in the next seven to 10 years returns that will be lower than they were in the past seven years since the financial crisis, and that long-term targets of inflation plus 3.5 per cent may be unreachable.
The search for growth has also pushed some super funds into riskier assets.
Mr Chant said retail funds beat industry funds in the October with average returns of 3.5 per cent to 3 per cent.
"Industry funds still hold the advantage over the longer term, having returned 7 per cent per annum against 5.8 per cent for retail funds over the 15 years to October 2015. However, performance over periods of seven years and less is much closer".
Across balanced growth options the industry fund sector is ahead 6.4 per cent year-to-date, compared to 5.6 per cent for retail funds.
Conservative investment options, in which most retired pension fund members are invested, returned on average 1.4 per cent in October and are tracking a gain a 3.9 per cent calendar year to date.
