Grim outlook for Australian super funds

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Australian super funds will find it much harder to make money in coming years, say investors who manage money directly for, or on behalf of Australia’s $2.9 trillion superannuation industry.

The nation’s sovereign wealth fund last week stated that future returns definitely won’t be as strong as those enjoyed by fund holders in recent years.

Superannuation members have enjoyed close to double-digit investment returns since the end of the global financial crisis a decade ago. But given the global economic uncertainty, the outlook is very different.

Super consultancy firm Rice Warner warned of the likelihood of lower earnings in a report released last week.

“There are indications that global growth … could be negligible for many years. Slow growing and ageing populations, debt mountains, unforeseen trade wars and low inflation provide a paradigm with new rules and metrics,” states the report.

Even Australia’s largest super fund, AustralianSuper, has informed its customers of lower returns now and for the foreseeable future.

But it’s not all doom and gloom for those reliant on the earnings of their super savings. There may be promise of stronger returns should super funds look towards less traditional markets.

That’s the assessment of investors who met last week at the Australian Superannuation Investment (ASI) conference in Hobart.

Less traditional assets will include investing in apartment development and even lending directly to companies.

“We have to look at non-traditional asset classes to achieve those goals going forward,” said Ross Etherington, chief investment officer at EISS Super.

With stocks and bonds becoming less attractive investment options, investors are looking to diversify to hedge against the insecure global economic outlook.

“There will be a lot of pressure on investors to try to chase returns for the next six to 12 months,” said managing director and co-head of multi-asset investing at Lazard Asset Management.

According to investors, apartment developments are a “very stable” asset class, and many say there’s an opportunity to directly lend to Australian companies where returns are above similar deals offshore.

Some still favour domestic equities. According to AMP Capital Investors Ltd senior economist Diana Mousina, stocks “look very attractive” and are ready for a period of outperformance after being beaten by their US peers since the global financial crisis. She also likes the relatively high dividend yields and the favourable tax advantage from franking credits, according to a Bloomberg report.

Are you concerned for the future of your fund? Do you manage your own super? How do you plan to mitigate poor returns?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?



Total Comments: 9
  1. 0

    Yet when you talk to people like Terry Tran they tell you the Government uses the media to cause certain financial situations to make people panic. This is a classic example of how this works.

  2. 0

    Isn’t super based on interest rates and growing your money, don’t some hugely super wealthy financiers from way back beyond Napoleon and the Rothschilds etc, don’t these modern version of them then ( probably descendants), decide at a whim on what interest will be set at?
    Don’t they create, and then, end downturns, recessions, depressions???
    Is the Stock Market not just a giant T.A.B.
    Isn’t super supposed to be a guaranteed thing to a degree? If you put your life’s work into an investment for retirement?
    If the government (s) answer no that it is your risk , but you need it anyway!
    Then if it is so important to all the superannuated people, why has rolling governments of different colours allowed the welfare system to fall backwards, with pensions hard to get with age for retirement put back to different age brackets, where it can be seen in many many areas of those people trapped in the middle of having to work longer because their eligibility is out of order until a year or two later. We understand that some people want to work on, but I had a neighbour who became unwell and had to sell her house and could not be pensioned for another 3 years. Yes these things happen, tragic and yet we read nothing but misery and maybes about the financial situation of our country our world and our local living standard, because you have to be almost a genius to fill out the ambiguous nonsense centrelink make you fill in.
    Plus every week the manipulators tell us its getting worse and your super won’t last, and NO NO NO you have to be prepared to scrounge information about your selves your life style your belongings to get a scrap of centrelink help. When this country has sold out its industries its motor industry especially and other industries, we have under and UN employment, people can’t buy homes, we are over loaded with immigration and yes sadly refugees from places we have no control over, but have to take a share, then we have the insanity of people like Andrews in Victoria , ruining that place closing down coal power stations , having so much gas underground that they could save the nation, they like the oppositon federally are green driven fools that want us to go back to the dark ages, climate change , is politics , the climate has changed since before human beings ever existed, that is a fact, clean the pollution on the ground and in the rivers and bush land and cities create jobs , don’t let machinery by artificial brains in computers take over our employment, AND GUARANTEE FULL PENSIONS AND SECURITY IN FULL OF PEOPLES SUPERANNUATION, THEN THAT SECURITY CREATES SPENDING WHICH IN TURN CREATES THE LIVING STANDARD WE REQUIRE , IN WHAT USED TO BE THE BEST COUNTRY ON EARTH,.
    But is slowly slipping into the same hole as many other places, manipulated by the” Interest Meeting” hidden wealth men of the world, who control every thing that happens.
    Perhaps that’s why the Democrats and SOME Republicans of the political elite USA… are so terrified of Trump , that he may just bring some fairness into the manipulated world economy by just a few.
    If super falls over the government better get its welfare service in order!!!!
    Work your backside off all your life, to what? Put money in investment super and find it dwindled away as you move to the end game!

  3. 0

    A long response John, but a lot of common sense and pointed questions there,
    I remember when Labor decided to bring in our so called marvellous super system they had scoured the earth to find. All they had to do was go to Singapore where a very smart man Lee Kwan Yu brought in a great system that made Singapore a very rich and orderly society. He used workers’ super to fund infrastructure – not rocket science and not feeding t hge already ‘fat cats’.

  4. 0

    A long response John, but a lot of common sense and pointed questions there,
    I remember when Labor decided to bring in our so called marvellous super system they had scoured the earth to find. All they had to do was go to Singapore where a very smart man Lee Kwan Yu brought in a great system that made Singapore a very rich and orderly society. He used workers’ super to fund infrastructure – not rocket science and not feeding t hge already ‘fat cats’.

  5. 0

    I doubt if some of the interest rates are doing to rise a lot while Home Loan and other interest is so low. They have to make a proft somehow

  6. 0

    This online magazine is becoming nothing but a sensation-seeking rag, just like most broadsheets. Almost every article is spelling out a black scenario for older citizens. Life is just not that bad and I for one prefer to see that positives in life as well as the negatives. If YLC doesn’t pull its socks up and become a more balanced magazine then I will stop reading it. Leave sensationalism and pessimism for the newspapers and TV news programs. Start reporting more about the good aspects of life. I don’t want to spend my last years on Earth dwelling on bad things that may never happen.

  7. 0

    thanks guys for the info. i was always told that if you don’t understand something don’t do Superannuation. i learnt about property investing etc. i had 3 children and only my husband was working. i sold my residential properties every 4 yrs as i could not afford to maintain them. i kept building a new home. i invested 50.00 a week in investment properties as the rent covered the rest of the mortgage. selling the investment properties at the right time paid off the residential mortgage . i think getting rid of your residential mortgage is better then placing your money into super. my friend lost 100,000.00 in super just before he retired. i am a stay at home mum and managed my husbands wage of 700.00 a week. kids have left home now and my husband retires in 3yrs. i do a lot of voluntere work. i believe you live by your means and not greed. if you are not content you will never be happy. you put all that money away for retirement and who knows how long you are going to live. years ago i learnt about banks and brokers…banks were over charging me on my mortgage…sorted that out. i loved maths at school. im so glad years ago the banks would only approve a mortgage on the mans wage.



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