Outlook grim, sit tight: analysts

Money in the bank is unlikely to be earning you much and the outlook for super in 2019 is also grim – and that’s on the back of sharp declines last month that pushed many funds into negative territory for the year.

Data released yesterday by superannuation research house SuperRatings shows that major fund categories all suffered declines in December to end a horror fourth quarter.

The median return for the balanced option in December was -1.2 per cent, contributing to a loss of nearly five per cent for the quarter (-4.7 per cent) but keeping members just above water for the year, with a gain of 0.6 per cent, SuperRatings reports.

Members in the median growth option or exposed solely to domestic or international equities were not as fortunate. Growth option members suffered a -1.7 per cent decline in December and -0.3 per cent for the year, as heavy losses in the fourth quarter clawed back earlier gains. Members in the median Australian shares option experienced declines of -0.9 per cent in December and -3.4 per cent for the year, while the median international shares option recorded a loss of -3.9 per cent for December and -1.7 per cent for the year.

SuperRatings executive director Kirby Rappell said that while the latest data will be a cause for concern for many super members, it’s important to keep a long-term perspective.

“For many super members 2018 will be remembered as a turning point”, said Mr Rappell. “Volatility is likely to be a feature of markets over the coming months and members can expect ongoing fluctuation in returns.

“However, it’s important to keep a long-term perspective and recognise that super returns have been overwhelmingly positive over the last decade.”

Despite the declines, super members remain well ahead over a 10-year period, with $100,000 invested in the median balanced option in December 2008, now worth $204,264. The same sum in the median growth option over the same period is worth $215,051.

Those invested in domestic and international shares have performed even better over the last 10 years, says SuperRatings, despite a more volatile 2018. An investment of $100,000 in the median Australian shares option in 2008 is now worth $227,120, and in the median international shares option, it would be $233,166. Meanwhile, $100,000 invested in the median cash option 10 years ago would be worth only $130,306.

As we enter a more challenging investment environment, the importance of reviewing your superannuation fund to ensure it is in line with your retirement objectives is paramount.

Chant West senior investment manager Mano Mohankumar also stressed the importance of looking long-term.
“Leading in to 2018, the median growth fund had averaged close to nine per cent return over the previous nine years, so a flat or negative year was on the cards,” he told Fairfax Media.

He said the best-performing funds had relatively higher allocations to unlisted assets – including strong-performing sectors such as infrastructure, property and private equity – rather than shares.

Meanwhile, new research from Roy Morgan confirms that industry funds would be the net winners from the Productivity Commission’s (PC) recommendation for a short-list of top-performing funds.

The research, released yesterday, revealed that over the six months to November last year, eight of the top 10 performing funds, based on member satisfaction with financial performance, were industry funds, led by Catholic Super with 70.5 per cent, followed by UniSuper with 69.7 per cent.

The only retail funds to make it into the top 10 were ASGARD with 65.1 per cent and Macquarie with 63.7 per cent.

The Roy Morgan analysis found the five major retail superannuation funds had an average satisfaction rating of 54.7 per cent, well below the industry fund average of 61.8 per cent.

“The best performer among the majors was Colonial First State with 60.7 per cent, well ahead of second placed BT (55.6 per cent). The lowest satisfaction among these majors was for AMP with 50.4 per cent and it was in fact the lowest of all the funds reported on in the Superannuation Satisfaction Report,” the Roy Morgan analysis said.

Is your confidence in your retirement income suffering? Do you have a plan C?

Written by Janelle Ward

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