Funds maintain 2024 rally with ‘flying start’ in Jan

19 February 2025

| By Jessica Penny |

New analysis shows that super funds had a strong January despite end-of-month jitters.

Super funds got off to a “flying start” in 2025, according to new data from Chant West, with the median growth fund - those holding 61 to 80 per cent in growth assets - gaining 2.2 per cent in January.

This, Chant West said, was despite share market jitters towards the end of the month, and following a strong 2024 result - with the median growth fund returning 11.4 per cent over last calendar year.

Senior investment research manager, Mano Mohankumar, confirmed that January’s returns were driven by strong domestic and international share market gains, which in aggregate accounted for about 55 per cent of the typical growth option.

“In terms of international shares, Europe led the way in January with the US lagging most developed regions,” Mohankumar said.

“Donald Trump officially took over as President for his second stint in mid-January and sentiment in the US continued to be buoyed by his ‘America First’ policy agenda. However, his tariff threats shook markets at the end of the month.”

The investment research manager further pointed out that January saw a period of underperformance by US tech stocks following the emergence of Chinese start-up DeepSeek, which claims to have trained its generative AI tool to produce results comparable to market leaders at a fraction of the cost.

Last month developed international shares returned 3.4 per cent and 2.7 per cent in hedged and unhedged terms, respectively.

“Australian shares fared even better, surging 4.5 per cent given its low weighting to AI-related companies and higher exposure to financials,” Mohankumar added.

According to him, ongoing tariff threats weighed on emerging markets, which underperformed developed markets with a return of 1 per cent. Meanwhile, bond markets were relatively flat with Australian and international bonds returning 0.2 per cent and 0.4 per cent, respectively.

Long-term performance above target

Since the introduction of compulsory super in July 1992, the median growth fund has returned 8 per cent per annum, Chant West said.

“The annual CPI increase over the same period is 2.6 per cent, giving a real return of 5.4 per cent per annum – well above the typical 3.5 per cent target,” Mohankumar explained.

“Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020, and the high inflation and rising interest rates in 2022 – super funds have returned 7.2 per cent per annum, which is still comfortably ahead of the typical objective.”

Chant West’s data shows that for the most part, the median growth fund has exceeded its return objective over rolling 10-year periods, which is a commonly used timeframe consistent with the long-term focus of super.

According to the firm, the exceptions are two periods between mid-2008 and late-2017, when it fell behind.