Super fund returns at risk of being negative for this financial year

By Jon Bragg

May 19 2022
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With two months to go in the current financial year, super funds are only just in the black.

The median balanced super fund lost 1.1 per cent in April, new estimates from SuperRatings have revealed, as funds faced significant pressure stemming from increased volatility.

While delivering positive returns in all but one month in 2021, the median fund has now declined in three out of the first four months of this year, dragging down the return for the 2021-22 financial year to just 1.2 per cent.

“It is challenging to say whether super funds will end the financial year to 30 June 2022 in the red or the black at this stage, as it could go either way,” said SuperRatings executive director Kirby Rappell.

“However, we have seen funds continue to deliver above their investment objectives over the longer term which typically sit around CPI +3.0%. Sticking to a long-term strategy and blocking out short-term noise is as important as ever, with long-term performance being what really matters.”

Over the past calendar year, the median fund is up 4.2 per cent, with stronger returns delivered per annum over the past three years (6.5 per cent), five years (6.9 per cent.), seven years (6.7 per cent) and 10 years (8.2 per cent).

The median growth option fell by 1.5 per cent in April but is still up 5.0 per cent over the past year and 9.4 per cent p.a. over the past 10 years.

Meanwhile, the capital stable option recorded a smaller fall of 0.7 per cent for the month and has risen 1.0 per cent in the past year and 4.9 per cent p.a. over 10 years.

“Looking back over the last 15 years, the median balanced option has added more than 120 per cent, similarly members sitting in a typical growth option will have seen their retirement nest egg grow by around 121 per cent,” said Mr Rappell.

To illustrate this growth as well as the risks of not sticking to a long-term strategy, SuperRatings calculated the performance of a $100,000 investment in super since 2007.

In the median balanced option, this investment would have grown to $219,775, while in the median growth option, an even greater increase to $221,058 would have been recorded.

If this $100,000 investment was switched from balanced or growth to cash at the onset of the COVID-19 pandemic in March 2020, SuperRatings said that the balance would be roughly $45,000 to $55,000 lower.

“Making snap decisions can lead to a worse outcome and it’s best to set a long-term strategy and stick to it, as we see markets recover losses from these unexpected events over time,” Mr Rappell concluded.

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