According to Chant West, the slow start follows on from 10 years of positive super growth.
Its research noted that the median growth fund – 61 to 80 per cent growth assets – was up 1.4 per cent in July.
However, with markets down in the first half of August, those gains have been reversed and the median fund has found itself in the red for the new financial year.
Chant West’s senior investment research manager, Mano Mohankumar, noted that markets have become more volatile and are down over August.
He said diversification has managed to stop mass losses for the average growth fund.
“On average, growth funds have about 55 per cent invested in listed shares and listed property so that leaves a substantial 45 per cent allocated across a wide range of other sectors, including unlisted property and infrastructure as well as traditional defensive sectors like bonds and cash,” the research manager outlined.
He explained that this creates a cushion for superannuation members, and means the total losses for super fund members have not been as severe as it has been for equity investors.
“So, while Australian shares and hedged international shares are down 5.5 per cent and 4.7 per cent, respectively, in August so far, we estimate that the median growth fund is only down 2.2 per cent,” Mr Mohankumar continued.
According to the research manager, younger superannuation members can be less concerned about the falling rates than older Australians. He said older Australians should hold a more defensive portfolio.
He emphasised that how fund members react to negative headlines is important.
“Older people approaching retirement are naturally more likely to be concerned about seeing their balances go down than people in their 20s or 30s” and they tend to be more conservatively invested, the manager said.
“We estimate that conservative funds (21 to 40 per cent in growth assets) are only down 0.4 per cent over August to date,” Mr Mohankumar said.
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