Super funds start new year in positive territory, but pandemic risk remains

By Cameron Micallef

August 13 2020
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Australian super funds are close to regaining last financial year’s losses but still face COVID-19 headwinds with Victoria entering a second lockdown, new research has found.

Super funds start new year in positive territory, but pandemic risk remains

The median balanced option returned 0.9 per cent in July as markets rebounded following falls through March, according to SuperRatings, although funds remain down 4 per cent on the start of 2020.

“The outlook is still unclear, but based on recent performance, super funds have shown they can weather the [COVID-19] storm,” said SuperRatings executive director Kirby Rappell.

“Looking at SuperRatings’ balanced option index, the sector is 4.0 per cent below where it was at the start of 2020.

“While we have seen stabilisation in markets, they remain vulnerable to further shocks, while super fund performance is contingent on how communities and economies cope with further waves of infections.”

The median balanced option is down 1.2 per cent over the 12 months to July, while the median growth option is estimated to have fallen -1.7 per cent. Further, the median capital stable option remains steady at 0.5 per cent.

July is the fourth month in a row of positive returns for super following the 9.2 per cent drop through March. July’s results represent the fourth month in a row of positive returns for super, following the 9.2 per cent drop members experienced in March.

While the results are promising, there is still a way to go before members recoup their losses, and the COVID-19 situation in Australia remains precarious as other states brace for potential spikes in infections.

“We can certainly take heart from recent performance, but we should not underestimate the challenge that we still face,” Mr Rappell said.

“Markets are incredibly difficult to navigate at the moment. Globally, we are seeing a disconnect between the rise in share valuations and the weakness in economic data. Meanwhile, the [low-yield] environment will only be exacerbated by governments issuing more debt to shore up budgets and continue providing support to those affected by the virus.”

However, Mr Rappell reminded members to take a long-term view with superannuation.

“Taking a long-term view, super returns have done an incredible job at accumulating wealth for retirees over a period that includes two major financial and economic crises,” he said.

“According to SuperRatings’ data, since July 2005, a starting balance of $100,000 would now be worth $235,877 for members in a balanced option. For a growth option, this would be slightly higher at $236,235.

“A member with full exposure to Australian shares would have seen their balance grow to $254,188. In contrast, returns on cash would have seen the balance grow to only $157,939,” Mr Rappell concluded.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement