With geo-political tensions running hot, Australian super funds have held firm in the face of global uncertainty, delivering a modest positive return in May and remaining on track for double-digit returns for the 2018 financial year.
According to superannuation research house SuperRatings, May return data shows super funds struggled through the month as global events, including an ‘on-again, off-again’ trade war between the United States and China, left markets frustrated.
The median balanced option return was only 0.5% in May, but despite a lacklustre month, the financial year-to-date return is sitting at a respectable 8.4%, putting super funds within striking distance of double-digit returns for 2017-18.
“May was a challenging month for super, with global factors playing a significant role,” said SuperRatings CEO Kirby Rappell. “The ongoing tariff saga between the US and China, along with talks between President Trump and North Korean leader Kim Jong-Un seemed to wrongfoot markets in May, and super funds were not immune from the uncertainty.”
“But despite May’s disappointing performance, super members should expect a very solid innings from super come 30 June. We need to see an average return of around 1.5% in June for balanced funds to record a double-digit gain for the financial year, which is entirely possible.”
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 in growth option funds fared much the same, with the median growth option growing at virtually the same pace in May. Investors with full exposure to Australian shares enjoyed a return of 1.1%, while those with predominately global share exposure were the laggards, with a median return of only 0.4%.
Over the last ten years the median balanced option has returned 5.9% per annum with an account balance of $100,000 in 2008 now worth $181,169. Interestingly, over the past 10 years to May 2018, the difference between balanced and growth option returns has been relatively small, with a balance of $100,000 accumulating to $184,299 for the median growth 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.
Super fund comparison reveals performance gap between best and worst
While super funds on average have an enviable track record, 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 $203,150, compared to the worst performing fund, which has grown to only $145,196 over the decade—a difference of $57,954.
Does your super fund hold up?
The tables below show the top 10 performing balanced and growth funds over the past 10 years to the end of April 2018. This is a good starting point for evaluating your fund’s performance, but there are a number of things to consider when deciding if your current fund is right for you. Fees and performance track record are important, but so are things like insurance, governance, and the member servicing environment, all of which can determine how well off you are in retirement.
With the new financial year upon us, now is the perfect time to think about how to get off to a flying start in 2018-19. There are some simple things all superannuation members can do right now to get the most value in retirement. SuperRatings provides this simple checklist to help you get your savings in the best possible shape.
