Super funds are heading towards the completion of the third financial year in a row of returns of well above 10 per cent.
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SuperRatings' calculations show a superannuation account balance of $100,000 in mid-2012 would be worth more than $142,000 now. It would be even higher if the 9.5 per cent superannuation guarantee was included.
Balanced options, where most people have their super, are well-diversified. They spread the money between the asset classes in Australia and overseas.
However, their single-biggest exposure, typically about 50 per cent, is to Australian and international shares.
Overseas shares, including dividends, have returned about 30 per cent over the past three years. Australian shares, including dividends, have returned about 20 per cent over the same period.
"Despite uncertainty about Australian and global growth, super funds have enjoyed a strong financial year to date," says SuperRatings' founder Jeff Bresnahan.
"Funds are well positioned to provide members with another [financial year] of solid returns," he says.
In the middle of last year most investment experts were expecting a more subdued return after the very strong returns of the past two financial years.
Warren Chant, the director of researcher Chant West, says: "Markets have proven to be more optimistic, even in the face of a patchy economic backdrop."
Chant says further likely cuts to the cash rate by the Reserve Bank of Australia, which could be as early as the Reserve Bank board's meeting on May 5, will provide further stimulus to the sluggish Australian economy.
He says, however, the picture is not entirely rosy.
"There are concerns about the impact of the high US dollar on US company earnings while in Europe there is renewed prospect of Greece failing to meet the conditions for its debt bailout," Chant says.
And economic data from China is also lacklustre, leading the Chinese authorities to introduce further easing measures to help boost the economy, he says.
The best-performing funds have tended to have a larger exposure to international shares, where the exposure is mostly unhedged back to Australian dollars.
The weaker Australian dollar against most other major currencies over most of the past three years has added to the underlying good performances of overseas shares.
The value of the Australian dollar against the US dollar, for example, has fallen by more than 25 per cent since the middle of 2012.
The fall in the Australian cash rate, Australian from 3.5 per cent as at July 1, 2012 to at 2.25 per cent now, has also helped with the performance of Australian bonds.
Australian listed property has also performed very strongly – it has a total return (including distributions) of about 70 per cent over the three years.
Chant is expecting to see returns moderating back to the long-term average at some point. Central banks in the US and Europe have been keeping interest rates artificially low to stimulate economic growth.
"Interest rates are being kept artificially low and that has been an absolute bonanza for equity [share] markets," he says.
Low cash rates have driven investors to seek higher yields through the sharemarket, both in the US and in Australia, which has helped drive share prices higher.
But the US Federal Reserve, which sets US interest rates, has indicated that it is getting closer to the time when it will start increasing interest rates.
"It has been great for fund members; they have done really well out of it," Chant says.
"But they should not expect the returns of the past three years to be the norm," he says.
Fund members with their money in their fund's balanced option should expect returns over the long term of somewhere between 6 and 7 per cent a year, on average.
Funds aim for a return of between 3 and 4 per cent above inflation, he says.
"That is a pretty good return over a lifetime," Chant says.
To find out which share funds performed the best, see Wednesday's Money
