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SuperRatings   ⟩   News & Insights   ⟩   News   ⟩   Super delivers through market ups and downs
Gordon Toy

AuthorGordon Toy

DateMay 15, 2018

CategoryNews

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Australian super funds are staging a comeback after being beaten down through the first quarter of 2018. According to superannuation research house SuperRatings, April data shows the median balanced option returned 1.7% in April, driven by gains from Australian and global shares.

Investors in growth options fared even better, with the median growth option returning 2.2% over April, while investors with full exposure to Australian shares managed a return of 3.5% after experiencing a fall of 2.9% in the previous month. As at the end of April, the median balanced option return over 12 months was a respectable 8.1%, reflecting the stability of superannuation returns over time.

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.

“What the April data shows is that superannuation serves members well through the market ups and downs,” said SuperRatings CEO Kirby Rappell. “Members with full equity exposure will have been rocked around by the volatility earlier in the year, but for super members in balanced or growth options, the ride has certainly been smoother.”

Over the last ten years the median balanced option has returned 6.0% per annum with an account balance of $100,000 in 2008 now worth $173,506. But picking the right fund can make a big difference to retirement outcomes: as the below chart shows, the best performing balanced option has grown to $194,341, compared to the worst performing fund, which has grown to $139,831 over the decade, a difference of $54,510.

Growth in $100,000 invested over 10 years to 30 April 2018*

Source: SuperRatings

*Interim results only

The SuperRatings data also reveal the long-term differences in different asset allocations. Interestingly, over the past 10 years to April 2018, the difference between balanced and growth option returns has been relatively small, with a balance of $100,000 accumulating to $174,158 for the median growth option versus $173,506 for the median balanced option. While the growth option is susceptible to higher drawdown risk when markets move down, over a 10-year period it has come out slightly ahead.

Value of $100,000 invested over ten years to 31 April 2018*

Select index

Source: SuperRatings

*Interim results only

Source: SuperRatings

*Interim results only

“For many super members, the balanced option is what they end up sticking with for their working life,” said Mr Rappell. “But increasingly we are seeing a trend away from the balanced option and towards options that offer more growth for more risk, especially among younger members.”

While long-term returns continue to hold up well, SuperRatings said members should not expect the market to deliver every month.

“Members are undoubtedly pleased to see the back of the sort of volatility we experienced in February,” said Mr Rappell. “But volatility is still high compared to the historic lows of last year, and for the rest of 2018 it is hard to see this theme of volatility disappearing off the radar. Central banks have begun to tighten monetary policy in response to inflation expectations, and this will require super funds to navigate a changing global market environment.”

The SuperRatings data shows that REST and CareSuper remain the best performing balanced options over the last decade for those in the accumulation phase, with returns of 7.1% per annum. Among growth options, CareSuper has outperformed the pack with a return of 7.5% per annum over 10 years, followed closely by Energy Super and Catholic Super on 7.4%.

Source: SuperRatings

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

Source: SuperRatings

*Return over 10 years to 31 March 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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