17th Nov 2017

Post GFC bull market delivers massive super fund windfalls

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Leon Della Bosca

The Global Financial Crisis (GFC) stripped many retirees of savings and earnings, but Australia’s top super funds have bounced back in phenomenal fashion, with investors benefitting from the longest ‘bull rally’ since the late 40s.

In the past 10 years since the GFC, analysis shows that Australian superannuation investors have enjoyed a massive windfall recovery. The median balanced fund has returned an accumulated 155 per cent since October 2007.

That means that an investor who had $100,000 in a balanced super fund in 2007 will now have almost $159,000 in their account.

As usual, the top 10 fund performers are dominated by industry funds, with REST atop the ladder returning an average of 6.1 per cent annually. All of the top 10 funds returned significantly more than the SuperRatings industry benchmark of 4.7 per cent.



 

 

 

“While the GFC may seem a distant memory for many investors, it was felt accutely by retirees and impacted incomes for many Australians entering retirement,” said SuperRatings Chief Executive Kirby Rappell.

“The main reason Australia was hit so hard is due to the significant exposure super funds have to domestic and global shares. However, since the end of 2009, we have enjoyed one of the longest bull markets in history. This has more than erased the pain of the GFC, and has put retirees in a better position than they might have expected.”

Local shares are also set to end the year on a high due to strengthening international markets and steady employment in Australia.

“It looks like the Australian market will finish in a strong position for the end of 2017, boosted by improvements in global economic conditions and an improving jobs environment locally,” said Mr Rappell.

“Retail sales are softer than investors would like heading into the Christmas season, but consumer confidence is improving and local shares are now joining in the global rally, which is a positive sign for super funds.”

How does your super fund stack up?

Related articles:
Your super just made you wealthier
Four tips to protect your super
Could we nationalise our super?





COMMENTS

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Tib
17th Nov 2017
11:17am
Usually when the public get excited by returns a crash isn't far away. It's probably time to be more conservative with your investments.
Cautious
17th Nov 2017
12:07pm
Good advice Tib
Rosret
17th Nov 2017
12:15pm
I did the averages over my working life and even will the boom times of the 1990s it averaged out at 5% p.a. compound interest.
So while its lovely and I can relax from being so frugal for 2018 I am also aware that the stock market is very much boom and bust.
At least the ASX seems to have more control these days.
Tib
17th Nov 2017
1:42pm
Rosret yes 5% is usually about what it averages out to. Some people will tell you how they are making much more but it's usually short term. Gamblers always tell you about their winnings not their losses.
Old Geezer
17th Nov 2017
1:50pm
A big fund manager has recently told me that their is a rotation starting to happen where the smart money is moving out of Sydney real estate into the Australian sharemarket. He says we are at the phase where people are starting to increase their exposure to shares but we haven't got to the dangerous phase where people have a fear of missing out.
Rosret
17th Nov 2017
12:11pm
Massive? No. ( I was in one of those listed above and changed - I think the figures are a bit - if you luckily selected the best option you got this %)
It has just caught up on a very dormant 3 years.
I am of two minds as to whether to pull this year's gain out so it doesn't get taken away again in the next dip despite the merits of supposed compound interest.
Those 5% averages need to minus fees, any life insurance and inflation - then how are we doing?
However I am not complaining this year. It certainly has lifted my spirits.
Old Geezer
17th Nov 2017
1:51pm
If they are the averages then there is an awful lots of fees being taken out.
Hairy
17th Nov 2017
12:16pm
What has been returned from the bad years can disappear in a flash.just remember someone made more money out of your money than you did.and they will be looking to make more,now you have more.Sorry I don’t trust anyone, least of all the theives and liars in goverment and financial institutions ,invest wisely.
Old Geezer
17th Nov 2017
1:47pm
Nothing new there as if you put money on deposit in a bank they make more out of it than they give you in interest.

Just remember boom and crashes occur because money fails into the wrong hands and a bust just returns money to it's rightful owner.
mr.auspicious
17th Nov 2017
12:19pm
The " massive windfall " is in reality " paper profits " or unrealised capital gains.

Word of caution - the gfc of 2007 may be viewed as a distant memory but the fallout still
weighs on sections of the global economy, particularly less prosperous economies. Major
downturns are also repetitive, creating circumstances where history does repeat...often
catastrophically.....
retroy
17th Nov 2017
1:52pm
You should have done the calculation based on the super balance before the 2007 crash and then see what the figure really is.
So what about providing that important fact before getting euphoric over the returns calculated on a very low base.
George
17th Nov 2017
2:48pm
Good point. I suppose why spoil a good story?
MICK
17th Nov 2017
2:23pm
And you wonder why the current government is circling the super industry like a starving white pointer and talking about taking over the retirement system. Super is a honey pot and pollies want it....to spend.....presumably on more things like postal votes for homosexual marriage and Royal Commissions intended to destabilise Labor.
Good luck to anybody who has money in super. Enjoy it until it is gone.
dreamer
18th Nov 2017
10:23am
mick I am going to draw mine out i rather pay tax on then lose it to those money hungry starve the worker mob
Jim B
17th Nov 2017
2:42pm
Those superannuation profit figures are a scam (and it's perfectly legal). Here's an mathematical example of how it's a scam (there's other ways too, but I'll try to keep it basic) ...... if you invest $1,000 in a super company over 7 years and get the following returns per year of 10%, 5%, -20%,10%,-10%, 5%, 10% then your final compounded amount is $1,054. However, the super company will advertise that the final compounded amount is MORE than that. What they do is *AVERAGE* all those different returns over that 7 year period. So the "average" return comes to 1.42% annually, and by using that "average" over the 7 years then the final compounded amount is MORE than the "real" return of $1,054 ... it is $1,103.

The result of all this is that superannuation companies always *AVERAGE* past yearly returns over many years in order to con potential customers into thinking the long term returns are higher than they actually are. It's a scam, and it's legal.

The following stock exchange figures show what the "real" world is like; if you would have had a set amount invested on the ASX 200 (investing the same amount in all the top 200 companies) ..... then in Oct. 2007 just before the start of the GFC the ASX 200 was 6697, and today 10 years later the ASX is 5960. So that's a LOSS. You would have LOST about 11% of your money.

Superannuation companies in the above article claim they provide "an accumulated 155%" return (the "averaging" trick), whilst all sane people living in the "real" world see the stock exchange's ASX 200 providing a LOSS of 11% over the same 10 year period.

Trust me folks .... the superannuation companies are NOT outperforming the ASX by that that massive amount. They are conning you.
Old Geezer
17th Nov 2017
3:01pm
You are looking at the wrong index.

You need to look at the accumulation index to get a more accurate result. It is quite a way above the 2007 highs .

https://au.investing.com/indices/s-p-asx-200-accumulated
Jim B
17th Nov 2017
3:49pm
"Accumulation" indexes are an industry tool to con people. Lots of people fall for the con. On "almost" every website that praises "accumulation" indexes you'll find adds, adds, adds, adds and more adds by people SELLING you financial information and advice.

The reason why these indexes display such MASSIVE "paper" profits is because they take into account the dividends paid and TOTALLY DISREGARD the lower resulting share prices after dividends are paid. This is then "mixed" with "averaging". And they magnify this by encompassing and lovingly embracing a slightly different version of the old "averaging" technique con. So the investor suckers say "WOW, look at those GREAT results from the past 10 years ..... gee I better put my million dollars with one of these advertisers". And guess what? They end up getting much LOWER returns than the published con figures suggest. And it's all perfectly legal ...... the lawyers have dotted every i and crossed every t .... it's impossible to successfully take 'em to court.
*Imagine*
17th Nov 2017
7:29pm
OG I repeat my post that was in response to your same point on an earlier report:
Thanks for the reference to the accumulation index that you suggest that I should refer to OG. Very interesting source. However, lies, damn lies and statistics have come around to bite you. The index that you quote reveals an even worse growth scenario than 7.5%. You have destroyed your own argument.

The index states that on Nov. 1 2007 it was valued at 41,416.7 and ten years later on Nov. 1 it was 59,716.9 a difference of 18,300.2. This works out as a percentage increase of 18,300.2/41,416.7x100 = 44.2%. However, it took ten years to gain this 44.2%, that is an average of 4.42% per year. I imagine that you didn’t bother looking closely at the figures or you would have kept quiet about this one.

As for percentage rises, Leon has used an unorthodox statement about an accumulated return of 155%. This can be interpreted as a 55% gain on the original. 55% accumulated over ten years - whooopeee! Like 5.5% per annum. We were getting more interest on term deposits ten years ago. I imagine some people are trying to kid us, either that or they need to learn maths.
Bonny
17th Nov 2017
10:57pm
4.42% pa is not a bad worse case scenario return. About twice what most banks pay in interest.
George
17th Nov 2017
2:46pm
Leon, please check the numbers. Based on "..returned an accumulated 155 per cent since October 2007", $100,000 should become $255,000, not $159,000. Please clarify.

Also, how is around 5% annual growth a "massive windfall"? One could have got more from Property.
Old Geezer
17th Nov 2017
3:03pm
Leon is right George as $255,000 is 255% of $100,000.
Raphael
17th Nov 2017
3:36pm
Nope George is right
If the fund returned 100% on its investment principal of $100k , it would now stand at $200k
If it returned 155% it would not stand at 255k
*Imagine*
17th Nov 2017
7:45pm
See above. Leon has used an unorthodox statement about an accumulated return of 155%. What he means is that you have 155% of what you started with. A statistic to impress, not one to elucidate.
A 55% return means that every $100 000 would return $55 000. Over ten years that averages out to 5.5% pa. And if you know anything about statistics 5.5% is not only the average (5.536 to be accurate) but also the median, and the mode, of the listed figures for fund returns that Leon has used. All up I would say that the return is poor when inflation is taken into account. I would not call it a windfall and I imagine that many others wouldn't either, if they understood the real maths.
Raphael
17th Nov 2017
9:38pm
55,0000 on a 100,000 principal over a 10 year period is rubbish . Means the fund got just over 4% p.a average
Old Man
17th Nov 2017
3:34pm
I wonder which group of figures have been presented this time. In past articles we have been shown figures that were all over the shop. The comparisons were growth against balanced against cash which gave little indication of the top performers.

Here is another look at figures of the top 10 best performers over the past 10 years to 30/6/17. Some similarities, some different. I'm sure that other "best performers" can be found which might support or refute all of these figures.

1 REST Core 6.2%
2 QSuper Balanced 6.0%
2 CareSuper Balanced 6.0%
4 UniSuper Balanced 5.8%
4 Hostplus Balanced 5.8%
6 Cbus Growth (Cbus MySuper) 5.6%
6 Commonwealth Bank Group Super Balanced 5.6%
6 AustralianSuper Balanced 5.6%
9 BUSSQ Balanced Growth 5.5%
9 Catholic Super Balanced (MySuper) 5.5%

I suppose that the old saying "there are lies, damned lies and statistics" could be mentioned around about now.
KSS
17th Nov 2017
9:15pm
Ultimately people have recouped their losses and then some and yet are still whinging!
Rae
18th Nov 2017
12:05pm
Not if they sold at the bottom, went to term deposits and are just now deciding to rejoin the fray buying overpriced shares into a bull market.

Good luck just make sure your stop loss is set sanely is all I can advise.
Old Geezer
18th Nov 2017
7:38pm
Any sensible person who understands risk would be doing very well.

I just can't understand why people buy stuff at discount prices but sell shares at discount prices and then buy them back a lot dearer. It has never made any sense to me.

The last two big downturns of our market one can feel the capitulation happening and it has been an great time to buy.
Bazza
18th Nov 2017
3:07pm
Your article stating that the 'post GFC bull market has delivered massive super fund windfalls' is totally incorrect and could be disconcerting to a major number of your readers.
Firstly, to have a super fund balance of $100,000 in 2007 would have required at least a $200,00 balance in 2006, as the ASX200, and therefore super funds in general, declined by >50% during this period. In fact, the ASX200 is still trading 15% below its 2006 peak some 10 years later!!
To say that 'an investor who had $100,000 in their balanced super fund in 2007 will now have almost $159,000 in their account' and say that these are 'massive super fund windfalls' is absolutely codswallop!!
In reality the current super fund value is still approximately $40,000 worse off 10 years later, and that's without even taking into account inflation!
I think YLC should offer an apology to their readers for printing this mis-information - I, like many of your readers, have still not recovered from the GFC setback.
Old Geezer
18th Nov 2017
7:03pm
Bazza the ASX200 is an index of 200 stocks and does not take into account dividends, stock splits, capital raisings etc. You need to look at the accumulation index instead as super funds get dividends etc that are not shown by the ASX200.

My investment in the Australian stockmarket has grown quite well since 2007 even though the ASX200 index has not.

YLC needs to not apologise to their readers but educate them as some just don't understand what is really going on.
*Imagine*
19th Nov 2017
6:10pm
OG Do me a favour and read my post above that responds to your accumulation index reference. This index has increased by 4.42% pa over the ten years since Nov 1 2007. I have posted it twice in response to you keep banging on about it. Try listening for once and you will have to agree that the ASX is still not back to where it was in 2006. There are no windfall profits through superfunds, as evidenced by the figures provided by YLC. The article is misleading, it contains facts that have been misinterpreted and the title is dishonest unless 5.5% is now considered a massive windfall. The statement that "The median balanced fund has returned an accumulated 155 per cent since October 2007." is not a normal descriptor for a gain of 55% and is meant to sensationalise a mediocre 10 year return of 5.5%pa.

Having said that, there are indeed some equities, particularly IPO's that have done very well in the past two years, but that is not the focus of the article. Neither is your personal return from your stock picks, the article is about the "average Australian Superannuation Investor".We need honesty not sensationalism in 'on line news' (and comments) or we end up with poorly educated readers. I imagine even you would concede that point.
Old Geezer
19th Nov 2017
7:10pm
Just remember if you can make 5.5% taking the worse case scenario then it doesn't take much imagination to see that most people would not have invested at the worse possible time. Not too many wake up and think I'll invest all my money today in the stockmarket!

Many have done much better as there was some real bargains to be had after 2007 especially some of those capital raisings by the big banks. These don't even show in the chart of the big banks let alone the XJO or the XAO. Many stocks are now a lot higher than they were in 2007 too. I know as I have had to decrease my holdings in many stocks as I got above my rule that I only hold a certain maximum percentage in any one stock.

If you take the 2-3 % you can get with money on deposit with a bank 5.5% is a good return. One of the big 4 banks is now yielding over 9%pa with the rest not far behind.

So I really don't know what you are concerned about.
Rae
20th Nov 2017
10:14am
a 5.5% return is not too shabby. It could have been worse. Also back in 2007 the bond portion was doing it's job and cut in to help stabilise portfolios. So people didn't lose unless they were fully invested in shares.

This account forgets that property and bonds also add to the mix.

Property in particular has done well up until last year.

Then there was the huge return from international shares back when the $AU corrected downwards. I put on 32% just there over a few months on that portion of my portfolio.

The media seem fixated about the ASX now as it appears to have started a run. They don't mention the run up in the dow. It is huge. Bigger than ever before.

As OG said a sane investor would be valuing all investment classes and acting carefully. These types of over valued markets can be dangerous to the unaware.

Hopefully the fund managers are on the job. That is what the hefty fees and charges are for supposedly.
Rae
20th Nov 2017
10:18am
Should have said didn't lose all as of course the super accounts fall badly on a share crash especially if they panic or are forced to sell at that point. duh.
Bazza
19th Nov 2017
8:13pm
"Old Geezer".. we are concerned about the fact that you are sprouting dishonesty and rubbish.
Your article says that the average Australian super fund investor has enjoyed 'massive super fund windfalls' and that 'super funds have bounced back in phenomenal fashion'. An average 5.5% return, before inflation, renders your article TOTALLY MISLEADING AND FALSE.
*Imagine*
20th Nov 2017
9:58am
Bazza, I give up. Old Geezer is obsessed with his own investments and how well he does, in comparison to everybody else who simply holds a superfund. He has no ability to comprehend views that run contrary to his own. He couldn't have read the YLC article, or if he did he didn't understand what it was trying to (incorrectly) convey. He just wants to point out how much better his 'money smarts' are, at every opportunity. Even after all the attempts to bring some perspective to the misleading YLC article Old Geezer refuses to accept that there is a genuine concern that the article is flawed and he just wants to reiterate how clever his investment strategy is compared to that of superfunds. I imagine that some must think that Old Geezer has become too daft and self absorbed to pay any attention to. It is also strange that the moderator has remained silent don't you think?
Bazza
20th Nov 2017
11:35am
Hi 'Imagine',
I'm about to give up too...... OG's irrational thinking and comments are a concern to readers not familiar with the markets. Having traded professionally for over 40 years I'll leave it at that!!


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