DateDecember 18, 2018
Super members are at risk of their first annual loss since 2011, after recording a third consecutive month of negative returns in November, as market volatility continues to test global markets.
The latest data from superannuation research house SuperRatings reveals a negative return of -0.6 percent in the month of November for members invested in the median Balanced option. This follows a decline in October of -3.1 percent and brings the calendar year to date return for 2018 to just 1.8 percent, with ongoing market weakness in December likely to eat away at what is left of super’s gains through 2018.
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.
Members invested in the median Growth option are now sitting on an annual return of 1.2 percent, while those with 100 percent exposure to Australian equities suffered a steeper decline in November of -2.4 percent, pushing them well into negative territory for the year to date, with a total return for 2018 of -2.4 percent. Meanwhile, despite suffering heavy losses in October (-5.8%), and smaller losses in November (-0.4%), members invested in the median international equities option have experienced returns year to date of 2.1 percent.
The last time super members experienced an annual loss was 2011, when the median Balanced option returned -1.9 percent, while the median Australian equities option suffered declines of nearly ten percent (-9.6%) and international equities dropped -6.7 percent over the calendar year.
Median balanced option calendar year returns
*Calendar year return to 30 November 2018
Despite the declines, super members remain well ahead over a ten-year period, with $100,000 invested in the median Balanced option in November 2008 now worth $206,366, while the median Growth option is worth $217,721 over the same period. Those invested in domestic and international shares have performed even better over the last ten years, despite a more volatile 2018 with $100,000 invested in the median Australian Shares option in 2008 now worth $230,482 and the median International Shares option rose to $238,925, over the same period. Meanwhile, $100,000 invested in the median Cash option ten years ago would only be worth $130,549 today.
Growth of $100,000 invested over 10 years to 30 November 2018
Interim results only
“Heading into 2019, it looks like members will need to get used to some of the volatility we’ve seen in markets over the past two or three months,” said SuperRatings Executive Director Kirby Rappell. “This is certainly a challenging environment for super funds at the moment. Share markets are under pressure globally, and recent data indicate that the economy is weaker than expected, with downside risks including a softening housing market having a real impact on confidence.”
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).
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