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.
“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.
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.
“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%.
