Sustained volatility fails to dent long-term super returns

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Australian super fund members have suffered a second monthly decline in returns in as many months as volatility shakes global markets and creates an environment not seen by most super members in a decade. However, median balances are well ahead for the financial year to date and superannuation remains one of the best investments over the last ten years.

These are just some of the findings from superannuation research house SuperRatings, which has reported an interim return of -0.7% in March for members in a balanced option. Members in a growth option (growth assets of 77–90%) fared worse with a monthly decline of -1.1%, while those exposed to Australian shares only, suffered a much larger -3.1% decline. The cash index was the only one to record gains with growth for the month of March of 0.1%.

It’s not all bad news, with super members in a balanced option still ahead for the financial year to date with growth of 5.7% and a rolling one-year average of 8.0%. Over the last ten years the median balanced option has returned 5.9% per annum with $100,000 invested in 2008 now worth $171,335. However, being in the right fund makes all the difference with the best performing balanced option outperforming the worst by more than $50,000 over the ten-year period.

 

 

The SuperRatings data also reveal the impact on super returns from exposure to global equities with the median international share index outperforming most other fund categories over the last ten years. Super members who had invested $100,000 in an international share index a decade ago would now have $188,240 compared to $171,335 for the balanced option.

 

 

SuperRatings CEO Kirby Rappell believes that the latest data is another reminder that despite ups and downs superannuation remains one of the best wealth generating options available. However, super members will have to adjust to the return of volatility.

“That latest market turmoil has had a short-term impact on super returns”, said Mr Rappell. “However, it remains overwhelmingly the case that superannuation continues to deliver strong returns to members over the medium to long term and is one of the most important sources of wealth for Australians.”

“Volatility is undoubtedly emerging as the new normal presenting an environment that many super members have not experienced in a decade. This volatility needs to be managed but no one should lose sight of the fact that super continues to deliver strong returns.”

The SuperRatings data shows that REST and CareSuper were the best performing balanced options over the last decade for those in the accumulation phase with returns of 7.1% per annum. Among growth funds, CareSuper performed best over the same period recording returns of 7.5% per annum, followed closely by HOSTPLUS and Energy Super.
 

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