The 10 top performing super funds of 2018

Photo by Scott Barbour/Getty Images
  • The median growth super fund finished the 2018 financial year up a 9.2%.
  • Hostplus took the top spot for the best performing growth fund with 12.5%.
  • The better performing funds were those that had higher allocations to listed shares and to unlisted assets — property, infrastructure and private equity.

The median growth superannuation fund finished the 2018 financial year up 9.2%, the ninth year of positive returns.

Hostplus, returning 12.5%, took the top spot for the best performing growth fund for the second year in a row.

Growth funds, in which most Australians are invested, have a 61% to 80% allocation to growth assets.

Analysts Chant West say the return this year was better than most experts expected a year ago.

And the return was also well ahead of the typical long-term return growth fund objective of the consumer price index plus 3.5%. With inflation running at about 2%, that translates to a target of about 5.5%.

“While shares are still the main drivers of performance, major super funds are well diversified across a wide range of other sectors including unlisted assets,” says Chant West senior investment manager, Mano Mohankumar.

“The better performing funds in 2017-18 were those that had higher allocations to listed shares and to unlisted assets — property, infrastructure and private equity.

“A lower exposure to traditional bonds and cash also greatly helped, given they were the worst performing sectors.”

The year’s top 10 performing growth funds are all not-for-profits:

Source: Chant West

Share markets have been resilient despite fears about a potential US-China trade war, political tension between North Korea and the US and continuing uncertainty about the pace and timing of interest rate increases.

International shares rose 10.8% over in 2018 in hedged terms and 15.4% unhedged, while Australian shares also had an excellent year, gaining 13.2%.

Mohankumar says fund members should think long term.

“By all means look at what your fund delivered over the year, but it’s even more important to know what its long term objectives are and whether it’s achieving them,” he says.

Most growth funds aim to beat inflation by 3% to 4% a year.

Looking back 26 years to the start of compulsory super in 1992, the annualised return is 8.3% and the annual CPI increase is 2.5%, giving a real return of 5.8% per year, well above that 3% to 4% target.

Here are the returns from growth funds since the start of compulsory superannuation:

Source; Chant West

“Returns are important but so is risk, and most funds also set themselves a risk objective,” Mohankumar says.

“Risk is normally expressed as the chance of a negative return, and typically a growth fund would aim to post no more than one negative return in five years on average.

“Over the longest period we can measure Australia’s major super funds have delivered on their promises to members, growing their wealth in real terms while protecting them from undue risk. That’s an achievement the funds should be proud of, and they should be making sure their members are aware of it, too.”

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