Australian super funds are still on track to post double-digit gains this financial year, despite the local sharemarket falling 9.2 per cent since its peak last month.
According to research house SuperRatings, median balanced funds are on track for a gain of between 13 and 14 per cent in this financial year.
"At 13 per cent, it would be the sixth-highest returns and similar to those of 2003-07, which were during strong economic conditions prior to the GFC," said Kirby Rappell, research manager at SuperRatings. He said super fund returns are likely to remain above their pre-GFC peak.
Mr Rappell said after strong growth in the first 10 months, returns have moderated in May and June. But portfolios with international shares have fared better. "While the strength of the Australian dollar hurt international share returns on the way up, it is helping them out on the way down. The fall in the dollar has cushioned falling markets and offset some of the losses," he said.
The problem entering the equation now is where investors can find domestic growth as the mining investment boom has come to an end and a number of economists have increased their estimates for the probability of a recession.
Goldman Sachs estimates a 20 per cent chance of a recession, while Macquarie and Nomura are more bearish at 30 per cent.
Bank of America Merrill Lynch strategist Joshua Kirkwood said Australia's transition away from the mining investment boom is more risky than the market appreciates.
Mr Kirkwood said banks, one of the main drivers of growth on the ASX this financial year, face structural headwinds as households continue to favour paying down debt rather than increasing spending.
"GDP growth slowing to less than 2 per cent could reduce banks' earnings by up to 5 per cent, unless additional costs are taken out," he said.
Instead, Mr Kirkwood said offshore industrials were a better option because they were not completely leveraged to the Australian economy.