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SuperRatings   ⟩   News & Insights   ⟩   Media releases   ⟩   Forget volatility, super members are in a winning market
Kirby Rappell

AuthorKirby Rappell

TitleChief Executive Officer

DateMarch 15, 2018

CategoryMedia releases

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Australian super members have earned returns of 117% on average since the depths of the Global Financial Crisis (GFC) nine years ago, despite February producing the first negative monthly return since January 2017. Recent data also reveals the risk for members in trying to time the market over that nine-year period and the cost of potentially switching products due to a relatively short period of underperformance.

These are the latest findings from superannuation research house SuperRatings, which has reported a return of -0.3% in February for members in a balanced option fund. Over the nine years since the GFC, the median balanced option fund has delivered an average return of 9.0% p.a. (representing accumulated growth of 117%). For members in growth option funds (growth assets of 77–90%), the median return has been even higher, reaching 9.9% p.a. or an accumulated 134%.

SuperRatings’ data also reveals that a flight to relative safety in times of volatility can have long-term effects on investment performance. If the volatility of the GFC resulted in a member switching from a relatively riskier growth option to a balanced option during the depths of the crisis in 2009, they would be approximately $17,700 worse off today (assuming a starting balance of $100,000).

Growth of $100,000 balance since the start of the bull market

Source: SuperRatings

“The lesson for superannuation members is that a focus on long-term performance is essential,” said SuperRatings CEO Kirby Rappell. “While members may feel unnerved by recent volatility, it is impossible to ignore the significant gains that super funds have delivered since the start of the bull market in 2009.”

February’s market correction had a negative impact on super fund returns, but when assessed within the context of long-term performance, the overall effect is negligible. SuperRatings estimates that the median balanced option return for February was -0.3% for accumulation funds and -0.4% for pension funds. Australian shares managed to rebound from early falls, with the S&P/ASX 200 Index 90% recovered by the end of the month. Despite the recent market pullback, superannuation members have good reason to be positive.

“After nine years, you might say the global share market rally is getting a bit long in the tooth, but this is at odds with the economic data, which is pointing to a strengthening economy,” said Mr Rappell.

“Market corrections, while they can cause members to panic, are often a necessary check against bubbles. What the recent volatility tells us is that the market is capable of self-reflection, and that investors are focused on valuations as well as the broader economic picture.”

Choice of fund matters

Looking back to the start of the bull market, there has been significant dispersion between the best and worst performing balanced funds. The worst performing fund has only managed to outperform inflation since July 2013.

Dispersion of best and worst performing funds

Source: SuperRatings

Interim results only. Median Balanced Option refers to ‘Balanced’ options with exposure to growth style assets of between 60% and 76%. Approximately 60% to 70% of Australians in our major funds are invested in their fund’s default investment option, which in most cases is the balanced investment option. Returns are net of investment fees, tax and implicit asset-based administration fees.

REST in top spot over 10 years

SuperRatings’ return data for January show that REST has taken first place among balanced option accumulation funds, returning 7.0% p.a. over 10 years, followed by CareSuper, which returned 6.9%. All funds within the top 10 have delivered in excess of CPI plus targets, highlighting the strength and consistency of Australia’s top performers.

Among growth funds, CareSuper was the leader, returning 7.3%, followed closely by Energy Super, which returned 7.3%. While balanced funds still represent the most popular option among members in both the accumulation and pension phase, growth option performance is becoming increasingly relevant. Since 2008, member allocation to higher growth options (including local and international shares, property, and high growth options) has risen from 8.4% to 13.6%, and SuperRatings expects that this trend will continue.

*Return over 10 years to 31 January 2018. Includes public offer funds only.

*Return over 10 years to 31 January 2018. Includes public offer funds only.

Release ends

Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to “General Advice” (as defined in the Corporations Act 2001(Cth)) and based solely on consideration of the merits of the superannuation or pension financial product(s) alone, without taking into account the objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If SuperRatings advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Product Disclosure Statement for each superannuation or pension financial product before making any decision about whether to acquire a financial product. SuperRatings research process relies upon the participation of the superannuation fund or product issuer(s). Should the superannuation fund or product issuer(s) no longer be an active participant in SuperRatings research process, SuperRatings reserves the right to withdraw the rating and document at any time and discontinue future coverage of the superannuation and pension financial product(s). Copyright © 2018 SuperRatings Pty Ltd (ABN 95 100 192 283 AFSL No. 311880 (SuperRatings)). This media release is subject to the copyright of SuperRatings. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth.), no part of this media release may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of SuperRatings. This media release may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to SuperRatings copyrighted material, applies to such third party content.

For more information contact:

Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au

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