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A strong performance from global shares has meant superannuation funds are on track to make solid returns for members this calendar year, despite recent jitters over a potential bubble in technology shares and doubts over the chances of further interest rate cuts.
While investors have faced some wild swings in markets this year, most dramatically the April plunge sparked by US President Donald Trump’s “Liberation Day” and Tuesday’s $60 billion tech gloom sell-off, research house Chant West estimates the typical “growth” fund option used by many Australians is on track for returns of 7.8 per cent over the year.
Returns from global shares, including the US market, have bolstered super fund returns. Credit: Bloomberg
With six weeks to go until the end of the year, and a growing debate about whether artificial intelligence shares are in a bubble, there are still plenty of risks on the horizon that could affect the final result.
But if the $4.3 trillion super sector does post returns in line with the 7.8 per cent year-to-date return cited by Chant West, it would be a solid result, slightly higher than the sector’s average returns of 7.1 per cent a year over the past 20 years.
Chant West on Wednesday said the typical “growth” fund – which has 61 to 80 per cent allocated to “growth” assets such as shares – returned about 1.2 per cent in October, thanks to a strong rise in global sharemarkets.
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This month, markets have dropped off, but Chant West’s head of superannuation research, Mano Mohankumar, said the median growth fund’s returns for 2025 so far were still sitting at about 7.8 per cent.
If maintained, he said this result would be better than funds’ typical long-term performance goal, and a positive result considering the uncertain economic backdrop.
“It would be a good outcome if it stays around where it is now, particularly given the circumstances,” Mohankumar said.
Wall Street has outperformed Australia’s market significantly this year – the S&P 500 is up about 12 per cent since the start of the year, compared with about 3 per cent for the S&P/ASX 200.
Matt Sherwood, Perpetual’s head of investment strategy, multi-asset, said the main reasons for the strong performance was the resilience of the US economy, hype around AI and interest rate cuts from the Federal Reserve. Sherwood said US earnings so far this year had been strong, with companies benefiting from higher revenue while costs were also brought under control.
“Overall, those factors have considerably outweighed the drag that was expected from the US tariffs,” he said.
However, Sherwood said that more recently sentiment had turned somewhat because of a debate about the extent of further US rate cuts and the sky-high valuations placed on US tech giants.
“All of a sudden, people are starting to question whether these behemoth US technology stocks should be traded on the valuations that they are,” he said.
In a blow to investor sentiment, markets have recently lowered the implied odds of a rate cut from the Fed next month, and there is also debate about whether the Reserve Bank will cut rates again in Australia.
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The looming end-of-year results for super funds come after the typical growth fund made 9.9 per cent in the 2023 calendar year and 11.4 per cent in 2024.
A key reason for the solid performance this year has been overseas sharemarkets, which Chant West says make up about 31 per cent of the assets of the typical growth fund option – compared with a weighting of about 25 per cent for Australian shares.
Sherwood said the weaker performance of the local market was due to company valuations that were high by historical standards, and low growth prospects for the economy.
“Australia has been one of the worst-performing markets this year. That reflects the fact that the market is egregiously priced in a lacklustre economy, Sherwood said.
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