Super funds take a hit in February, but analysts predict better times ahead

The welcome positive super returns in January have been short-lived, with balances hit by negative returns in February. But analysts say the longer-term view is promising. 

The latest monthly data from research and ratings house SuperRatings show a return of -0.4 per cent for the median balanced investment option in February. That followed a positive return in January – a 3 per cent increase for the median balanced option. 

The median growth option and the median capital stable option also decreased by an estimated -0.4 per cent. 

Pension rates saw similar results in February, with an estimated -0.5 per cent decrease in the median balanced pension option. The median capital stable pension fell by the same percentage, while the median growth pension option recorded a -0.4 per cent decrease. 

The consecutive rise and fall indicates market volatility and while SuperRatings flags a continuation of instability in the months ahead, it believes superannuation funds will not necessarily follow suit. 

Kirby Rappell, executive director of SuperRatings, said: “While super funds are estimated to have had negative returns over February, super fund returns remain much less volatile than equity markets.” 

Meanwhile, the Australian Prudential Regulation Authority (APRA) has released its Quarterly Superannuation Performance publication and the Quarterly MySuper Statistics report for the December 2022 quarter. The latter shows a drop in asset values in the 12 months to 31 December. 

Total superannuation assets dropped from $3489.9 billion in 2021 to $3386.9 billion last year – a fall of 3 per cent.  

Industry experts say 2022 is likely to prove an anomaly and forecast a rally in 2023.  

Alex Joiner, chief economist at IFM Investors, believes 2022 was the year in which super funds reached what he terms ‘peak pessimism’ and that many of those funds are now looking for turning points and opportunities to jump back into growth assets. 

“They’re looking for central bank pivots, inflation to come down and the worst of the economic downturn to be behind us, and a lot of people think that’s going to be by mid-year,” he says. 

Another signal of a potential bounce back in 2023 is that funds have historically rarely experienced two consecutive years of losses. 

While APRA’s quarterly performance report shows a downturn in assets, it also showed a significant increase in contributions to super funds.  

“Employer contributions totalled $30.3 billion for the quarter and $114.9 billion for the year ending December 2022 – an 11.8 per cent increase over the year compared to December 2021.” 

The report indicates the Superannuation Guarantee (SG) increase to 10.5 per cent per annum from 1 July 2022, combined with strong labour force figures over the year, were the most likely factors behind the increase. 

Mr Joiner’s optimism for 2023 is shared by other industry experts. Rainmaker director of research Alex Dunnin predicts super fund returns will quickly improve, with data already showing returns for the financial year to January 2023 have levelled to zero per cent. 

Mr Dunnin’s sentiments are backed by the Stockspot CEO Chris Brycki, who says funds with heavy exposure to Australian equities are performing especially well so far this year. 

The prevailing consensus across the super industry is that, after a slightly wobbly February, the outlook for the rest of 2023 is a positive one.  

Do you keep a regular eye on your fund’s performance? How well has it done in recent months? Why not share your thoughts in the comments section below? 

Also read: Explained: Superannuation work test

Andrew Gigacz
Andrew Gigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.
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