Global Tremors Send May Super Fund Returns Negative

The local bourse may be hovering at 11-year highs but superannuation fund members should not expect a bumper financial year after returns dipped in May, SuperRatings cautions.

Analysis by the research house found the typical balanced super option returned -0.7 per cent in May as global stocks were hit by the re-emergence of the US-China trade conflict and uncertainty around central bank policy.

“The bright side has been the resilience of Australian shares and property, both of which saw a brief boost from the Coalition’s surprise election win, but this was not enough to save super funds from a month of negative performance,” the report says.

“It’s been a disappointing end to the financial year for super, but long-term performance remains robust,” SuperRatings executive director Kirby Rappell said.

“The median balanced option return over the past 10 years is around 8.5 per cent, indicating that super has delivered solid returns even in a low interest rate environment.”

SuperRatings also found members in the median growth fund option, which includes higher weightings to growth assets like Australian and overseas shares, suffered a 1.2 per cent fall in May. The median international shares option fell 4 per cent, while the median Australian shares option held firm returning 1.4 per cent.

The report calls out listed property as the best performing asset class so far this financial year, with the ASX 200 A-REIT Index returning 14.5 per cent.

The May results on super fund performance are likely to reignite the debate over fees and whether managers are adding any value.

According to SuperRatings, $100,000 invested in the median balanced fund option in May 2009 is estimated to have reached an accumulated $217,391 a decade later. That compares to $230,873 over the same period for a median growth fund, while $100,000 invested in domestic and international shares is worth $244,382 and $258,181 respectively.

The median cash option for $100,000 invested 10 years ago came in with markedly lower returns of $129,748.

That analysis comes as retirees and investors with large cash piles are being hit by lower deposit rates, which could spur more money back into shares.

ING will today cut its savings interest rates by 25 basis points, joining others, including Commonwealth Bank, National Australia Bank, Suncorp and Citibank, that have reduced following the lowering of the official cash rate to 1.25 per cent.

“We have never seen at-call savings account rates this low,” InfoChoice boss Vadim Taube said.


By Joyce Moullakis - Joyce Moullakis is a senior banking reporter. Prior to joining The Australian, she worked as a senior banking and deals reporter at The Australian Financial Review.

The Australian Business Review

17 June 2019

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