Kirby Rappell
Super funds had a modest start to 2021, recording a small but positive result in January as markets responded to mixed news surrounding the pandemic and the pace of the economic recovery.
While not as strong out of the gates as members had hoped, January’s result nevertheless marked the tenth consecutive month of gains for super funds as members continue to claw back their losses since the start of the pandemic a year ago.
According to SuperRatings data, the median balanced option and median growth option both returned an estimated 0.4% in January, while the median capital stable option was flat at 0.1%. Over the 2021 financial year to date, the median balanced option returned 9.1%, reflecting the strength and speed of the recovery in the second half of 2020.
As Victoria endures a snap five-day lockdown and other state governments increase testing and tracing efforts in the face of the new ‘UK variant’ of the COVID-19 virus, markets are still exposed to potential downside risk. Despite good news on the vaccine front, it will take time for vaccines to be distributed nation-wide to every demographic. Until then, members should be ready for a bumpy ride in 2021.
“Super funds have had a promising start to 2021, but the pandemic isn’t over yet,” said SuperRatings Executive Director Kirby Rappell.
“Movements in financial markets are still closely tied to how governments are managing new COVID-19 cases, as well as the timing and efficacy of vaccines. In short, we expect more ups and downs in the market, and super funds are not immune.”
Pension returns were also slight but positive in January. The median balanced pension option returned an estimated 0.3% in January and 9.9% over the financial year to date. The median pension growth option returned an estimated 0.4% and the median capital stable option returned an estimated 0.1% through the month.
The pandemic still looms large across the global economic landscape, with over 100 million confirmed COVID-19 cases worldwide at the start of February. The gradual rollout of vaccines is offering hope that we can achieve a new normal despite early logistical roadblocks and shortages in some regions.
Meanwhile Australia’s recovery continues and has been most evident in the labour market, which continues to outperform expectations. The unemployment rate fell from 6.8% to 6.6% in December with 50,000 jobs added over the month. While lockdowns will likely continue to be used as a policy tool, they will hopefully be shorter and more targeted.
According to SuperRatings, super funds are in good health and well positioned for 2021 despite the challenges.
“One thing that was reinforced in 2020 is that Australia’s superannuation system is built to withstand market storms and even pandemics,” said Mr Rappell.
“Overall funds are focused on the risks and opportunities that lie ahead. To date, they have shown the ability to manage their investment positions and provide the additional support that many members need in this environment.”
