Retirement
Super funds immunised against ‘knee-jerk’ volatility reactions
As the outbreak of the coronavirus continues to create volatility in world markets, superannuation funds are remaining focused on long-term objectives and avoiding “knee-jerk reactions”, an industry expert said.
Super funds immunised against ‘knee-jerk’ volatility reactions
As the outbreak of the coronavirus continues to create volatility in world markets, superannuation funds are remaining focused on long-term objectives and avoiding “knee-jerk reactions”, an industry expert said.
According to SuperRatings executive director Kirby Rappell, superannuation funds are increasingly riding out volatility as lower interest rate yields makes it a necessity.
“They’re watching developments closely, but so far market volatility has been in line with similar risk events experienced in recent years. Fund investment strategies are generally well placed to manage these types of movements,” Mr Rappell said.
When compared with previous healthcare epidemics such as the Ebola outbreak in 2018 or the SARS epidemic back in 2003, Australian super funds have proved relatively resilient to short-term market movements. Quarterly returns during each episode have ranged between -2.1 per cent and +4.3 per cent, with markets largely unfazed over longer periods.
Con Michalakis, chief investment officer at Statewide Super, said that while the coronavirus will have an impact on markets, the fund is focused on the longer-term outcome for members.
“This is a classic case of a black swan, and like all black swans the markets struggle with uncertainty,” Mr Michalakis said.
“What we can be sure about is that the economy in China and Australia will be slower due to the restrictions in place in the first quarter of 2020. However, from a long-term perspective, diversification and strategy based on member age and risk tolerance is more important.”
Suzanne Branton, chief investment officer at CareSuper, said the superannuation industry has downside protection to support against market turmoil.
Ms Branton explained: “When new influences on the investment outlook emerge, it’s important to analyse and monitor these closely.
“There could be a short-term impact that provides investment opportunities or avenues to adjust positioning. However, there are reasons to expect a more short-term rather than extended, large-scale market impact.”
Strong returns in January, where it is estimated the median balanced fund option returned 1.9 per cent, will provide a buffer for the industry.
Over 12 months to the end of January, the median balanced option returned an estimated 13.8 per cent, while the median growth option return was estimated at an impressive 16.2 per cent. Returns over the past seven years are estimated at 8.8 per cent and 9.8 per cent, respectively.
“We expect to see volatility appear more frequently over the course of 2020, but overall, our outlook for super funds is positive,” Mr Rappell said.
“Long-term returns will continue to hold up despite the challenging return environment we find ourselves in at present. Members should look forward to a solid 2020 but expect some bumpiness along the way.”
RELATED ARTICLES
About the author
About the author
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
