Super still outperforming most asset types

group of happy retirees

Superannuation took a battering last financial year, but is there a better place for your nest egg?

The last 12 months have not been kind on super balances. In fact, just three median balanced funds saw a positive return in 2021-22, while the rest saw an average fall of 3.3 per cent.

It’s grim news for sure, but when compared with other investment types, super’s yearly result looks positively gleaming.

According to Chant West figures, international and local share market returns fell by 12.5 per cent and 6.8 per cent respectively.

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Australian bonds were down 10.5 per cent and global bonds were down by an average of 6.8 per cent.

The real estate market saw an average return of 6.2 per cent for the year, but property prices have since been falling due to interest rate hikes.

When looking at numbers such as these, superannuation seems to have gotten off lightly. The fact that three funds managed to turn a profit could actually be regarded as an achievement in the current climate.

“When members read or hear about large share market losses, they should take a moment to realise that their super hasn’t fallen by anywhere near as much,” says Mano Mohankumar, Chant West senior investment research manager.

“That was bad enough, but what made the year even more challenging was that bonds didn’t play their usual cushioning role.

“Despite all this, the median growth fund was only down 3.3 per cent. That’s mainly because most major super funds now invest far beyond these traditional asset sectors, with meaningful allocations to private equity, unlisted property and unlisted infrastructure, which all delivered healthy returns for the year.”

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While this is all good news, moving money into private and unlisted assets to avoid market exposure can come with problems of its own.

This is because of the way these types of assets are valued.

These types of assets – usually public infrastructure or private companies – are only valued periodically using complex financial methods that are largely based on comparing the assets to similar, publicly traded, assets.

This makes their true value somewhat difficult to ascertain, which can lead to the asset being overvalued.

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So, if your super fund has shifted the majority of your money into unlisted assets, there’s a chance your small loss for the year may actually be bigger.

But Mr Mohankumar says the negative headlines are generally nothing to worry about.

“A small step backwards this year is nothing to panic about,” he says.

“Members just need to filter out the ‘noise’ and look at the bigger picture. The negative return for FY22 represents only the fifth negative year in the full 30 years of compulsory super.

“The median growth fund is still 7.5 per cent ahead of its high point at the end of January 2020 before the COVID crisis took hold. More importantly, funds continue to meet their long-term return objectives by a comfortable margin.”

Have you viewed your super’s performance with a degree of pragmatism? Share your thoughts in the comments section below.

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Written by Brad Lockyer

Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.

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