Australia’s superannuation funds have faced their first test of the financial year, with a major market selloff in October likely to put a dent in account balances. According to preliminary estimates from SuperRatings, over the period 28 September to 11 October, a typical balanced option account with a $100,000 balance will have lost $2,700. For members with pure Australian share exposure, this amount rises to $4,800.
Impact of fall in share price index over the period 28 September to 11 October 2018
Source: SuperRatings, FE
October’s market jitters come on the back of lacklustre returns in the previous month, which saw super fund performance flat to slightly negative. According to SuperRatings, the median balanced option returned -0.1% in September as Australian shares came under pressure. However, while super funds may have taken a hit through the month, the data shows that superannuation has held up well over the past year, with the median balanced option delivering 9.7%.
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
“The market pullback is another timely reminder to members that good times should not be taken for granted,” said SuperRatings Executive Director Kirby Rappell. “We do not believe that recent selling will translate into a bear market for shares, but it certainly presents a clear message to super funds and other investment managers to be wary of holding too much risk.”
“These sort of market moves will inevitably impact superannuation account balances in the short term. However, over longer periods, as well as over the past 12 months, super returns are holding up well. The challenge for super funds in this environment will be to maintain discipline and stick to their long-term investment strategy.”
When there is a market drop, the balance of your superannuation can fall. However, it isn’t expected to affect most members directly as they cannot access their super. However, this is more challenging for those members nearing or in retirement. For most members, it is important to keep a long term view as volatility is unavoidable. Therefore, timing markets is a fraught exercise and one to be extremely cautious of.
Growth in $100,000 invested for 10 years to 30 September 2018
Select index
Source: SuperRatings
Interim results only
Source: SuperRatings
Interim results
When considered over the longer term, the recent selling will not significantly diminish the stellar performance achieved by super funds over recent years. An investment of $100,000 in the median balanced fund 10 years ago would now be worth around $193,751 as at the end of September 2018. In the best performing balanced fund over that period, the same $100,000 investment would have doubled in value to $213,156.
Best and worst performing balanced options to 30 September 2018
Source: SuperRatings
Interim results
A comparison of balanced option returns shows that CareSuper remains ahead of the pack with an annual return of 7.6% over the past decade, followed closely by Equip MyFuture and HOSTPLUS. While the global financial crisis, continues to cast a shadow over long-term returns, Australia’s top performing funds have nevertheless delivered some impressive results.
Source: SuperRatings
Source: SuperRatings
*Interim results
# IOOF Employer Super Core – IOOF MultiMix Balanced Growth Trust
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.
Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au
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