Fund returns for quarter analysed

The damage to superannuation fund returns has been far more contained than the steep falls in global shares, reports research house Chant West.

The median growth fund (61 to 80 per cent in growth assets) fell nine per cent in March and 10.1 per cent for the quarter. The return for the first nine months of the financial year also turned negative, down 6.1 per cent.

Chant West senior investment research manager Mano Mohankumar said: “Growth funds, which is where most Australians have their superannuation invested, hold diversified portfolios that are spread across a wide range of growth and defensive asset sectors. This diversification works to cushion the blow during period of share market weakness.”

And cushion it did, reports SuperGuide. While Australian and international shares were down 27 per cent and 20 per cent respectively from the end of January to the end of March, the median growth fund’s fall was limited to 11.7 per cent over the same period.

While this is still a significant fall in value, it’s important to realise that it represents a relatively brief moment in time in what is a very long-term investment, says SuperGuide Already, Australian shares and international shares are up 8.3 per cent and 8.9 per cent respectively in April to date.

“Our estimated return for April to date for the median growth funds is currently 3.8 per cent,” said Mr Mohankumar. “That’s a positive sign, but we’re far from out of the woods. In economic terms, the extent of the damage is still the great unknown and we may well see the pessimistic selling resume when more hard data is released over the coming months.

“One thing we do know from history is that markets bounce back much quicker than economies. Whether this recovery turns out to be quick or slow, we should expect heightened volatility to continue as investors react to good or bad news.”

In other welcome news, it appears the sky is not falling in as some Australians access their superannuation early.

When the federal government announced that Australians could access up to $20,000 of their superannuation in the next four months as part of its COVID-19 stimulus measures, there were fears that an avalanche of withdrawals could compromise funds’ investments and ruin retirements.

The warnings targeted younger Australians, pointing out that a “30-year-old who withdraws $20,000 now would end up $97,000 worse off in retirement”.

At that stage, 880,000 people had registered their interest to access their savings early.

Australians in financial hardship due to COVID-19 were granted access to $10,000 of their super savings before 30 June and another $10,000 next financial year.

Treasury estimated 1.5 million Australians might access their super.

After the first week of the extraordinary super withdrawals being available, the result is less dramatic. Despite 975,000 expressions of interest, only 456,000 people contacted the Australian Taxation Office (ATO), seeking $4.4 billion of their super savings.

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Written by Will Brodie


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