Results collated by Chant West have shown median growth funds — which have 61 to 80 per cent in growth assets — ended the year up 3.7 per cent.
While short of the 14.7 per cent members gained in 2019, Chant West applauded the funds’ ninth consecutive positive calendar year and the 11th in the past 12 years where members have enjoyed growth.
“If we take ourselves back to late March, the prospect of finishing the year up 3.7 per cent would’ve been inconceivable,” Chant West senior investment research manager Mano Mohankumar said.
“Over February and March, major sharemarkets took a beating and the median growth fund plummeted 12 per cent.
“Markets rallied from that point, however, and growth funds rode the rally to surge 15.5 per cent over the remaining nine months of the year.”
The superannuation specialist opined that 2020 has highlighted the importance of patience during volatile times.
“Members who sat tight generally did OK,” Mr Mohankumar said.
“Sadly, there were many others who panicked when markets fell and switched their investments to cash or a more conservative option.”
He explained that had investors swapped to more conservative options, they would have missed out on the rebound.
“And, of course, there were those who withdrew their money from super completely. That’s understandable to deal with temporary hardship, but they’ll now be faced with making up considerable lost ground,” he said.
Diversification, Mr Mohankumar stressed, is another important lesson learnt in 2020.
“Growth funds have their investments spread across a wide range of asset sectors, and that works to cushion the impact during periods of sharemarket weakness, as we saw in February and March,” Mr Mohankumar explained.
“At the same time, they still have a sizeable allocation to listed shares — about 54 per cent on average — so they’re able to benefit when those markets perform well, as we saw from April to December.
“The better-performing funds over the full year were generally those that had a higher allocation to international shares, particularly those with a ‘growth’ style bias. Holding bonds rather than cash would also have helped, as would a relatively low exposure to listed infrastructure and listed property.”