Tech exposures bolster stronger-than-expected super returns in FY24: SuperRatings

Super funds have demonstrated a stronger recovery from losses at the start of the financial year, with the median balanced option poised for an annual result just shy of 9 per cent.

For the year to June 2024, the median balanced option stands at around 8.8 per cent, displaying “a strong turnaround” since November 2023, said Kirby Rappell, executive director of SuperRatings.

He said top performers for the year would be “handing members double-digit returns for the year.”

The median passive balanced option, too, looked to return 11.6 per cent for the year.

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The annual result comes on the heels of another positive result in June, which saw the median balanced option rise 0.7 per cent, the median growth option rise 0.8 per cent, and the more defensively positioned capital stable options, holding cash and bonds, rise 0.6 per cent.

Pension returns were also on an upward trajectory, delivering 0.9 per cent for the median balanced option, 1 per cent for the median growth option, and 0.6 per cent for the median capital option in June. 

SuperRatings observed that, in the financial year 2024, international shares were the standout performers for funds, with the sector estimated to return 17 per cent as an AI rally, and associated industries, saw a small group of shares hit unprecedented highs.

Additionally, Australian shares made a strong contribution to super fund returns, with an estimated 11 per cent return for the sector.

Unpacking this strong performance, Rappell noted technology shares in the US, and bank shares in Australia, have “really driven” this year’s outcomes.

This means funds with higher levels of investments in these assets will have done well.

He said: “We expect all major asset classes to contribute positively to fund returns for the year, although the fixed interest and property sectors had a tougher year and are expected to make the smallest contributions.”

Still, he pointed out “risks remain” amid the robust sharemarket performance. In particular, he pointed to the trajectory for inflation in Australia and geopolitical risks emerging from ongoing wars and the upcoming presidential elections in the US.

Earlier this year, SuperRatings had flagged double-digit super returns as a possibility, with the estimated return for the first nine months of the financial year standing at 8.8 per cent.

However, in May, sticky inflation and the reality of a higher-for-longer scenario caught up with investment markets, with funds witnessing their first negative return since November 2023, subsequently bringing the upward momentum to a halt.