Second straight monthly loss for super members as volatility becomes the new normal

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Super members have suffered their second straight month of negative returns and are now firmly in the red for the financial year as market volatility and political uncertainty weighs on market sentiment. Nonetheless, super members remain well ahead over the long term with $100,000 invested ten years ago in any number of funds still worth more than twice as much today.

The latest data from superannuation research house SuperRatings reveals a decline of -3.1 percent in the month of October for members invested in the median Balanced option. However, because of stronger performance in July and August the losses for the financial year to date (FYTD) are lower at -0.9 percent. The decline has been more severe for members invested in the median Growth option, suffering a decline of -4.1 percent in the month of October and -1.5 percent FYTD.

 


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 who had directed their investments towards Australian and international equities have experienced even greater declines with the median Australian Shares option down -5.7 percent in October and -4.4 percent FYTD, while those in the median International Shares option suffered a decline of -5.8 percent in October but just -1.1 percent FYTD. The performance of the International Shares option reflects the divergence in domestic and international markets over recent months.

 

Growth of $100,000 invested over 10 years to 31 October 2018*

Source: SuperRatings *Interim results only

 

Despite the declines, super members remain well ahead over a ten-year period with $100,000 invested in the median Balanced option in October 2008 now worth $201,176 while the median Growth option is worth $210,534 over the same period. Those invested in domestic and international shares have performed even better over the last ten years despite the more volatile start to FY19 with $100,000 invested in the median Australian Shares option in 2008 now worth $221,436 and the median International Shares option rising to $227,265 over the same period. Meanwhile, $100,000 invested in the median Cash option ten-years ago would only be worth $130,867 today.

 

Best and worst performing options over 10 years to 31 October 2018*

Source: SuperRatings *Interim results only

 

“The market rally gave way to a rolling bear market in October, and despite an attempted recovery, this month remains under significant pressure,” said SuperRatings Executive Director Kirby Rappell. “Investors are concerned that earnings momentum is slowing and that valuations, especially in some growth sectors, are too high. Add to this significant uncertainty globally, whether it’s renewed trade tensions between China and the US or the continuing Brexit saga in the UK, and it looks like volatility will be a more permanent feature of markets heading into 2019.”

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