Super funds return to riches

Superannuation funds have bounced back to strong growth after seeing returns shredded in the first quarter of 2018.

SuperRatings research house reported yesterday that in April, the median balanced super fund returned 1.7 per cent, fuelled by gains in Australian and global stocks.

The spike followed two months of negative returns, with median balanced funds down 0.7 per cent in March and 0.3 per cent in February.

SuperRatings chief executive Kirby Rappell said the comeback proved the robustness of the sector and its ability to grow members’ returns through uncertain times.

“What the April data shows is that superannuation serves members well through the market ups and downs,” Mr Rappell said. “Members with full equity exposure will have been rocked around by the volatility earlier in the year, but for super members in balanced or growth options, the ride has certainly been smoother.”

Super members who had a full exposure to Australian shares collected the most handsomely in April with a median return of 3.5 per cent – a sharp turnaround from March’s fall of 2.9 per cent. Those with funds in a growth option saw returns of 2.2 per cent.

For the year to the end of April, the median balanced option returned 8.1 per cent. This is just slightly less than the five-year average of 8.5 per cent and much higher than the 6.6 per cent recorded over 10 years.

According to SuperRatings, $100,000 invested in a median balanced fund in 2008 would today be worth $173,500.

“But picking the right fund can make a big difference to retirement outcomes,” SuperRatings said. “The best performing balanced option has grown to $194,341, compared to the worst performing fund, which has grown to $139,831 over the decade – a difference of $54,510.”

The SuperRatings data shows that REST and CareSuper remain the best performing balanced options over the last decade for those in the accumulation phase, with returns of 7.1 per cent a year.

Interestingly, the long-term differences between balanced and growth options are relatively small. Investing $100,000 10 years ago in a growth option would create a balance of $174,158 today – a difference of just $652 compared with the balanced fund.

Among growth options, CareSuper,w has outperformed the pack with a return of 7.5 per cent a year over 10 years, followed closely by Energy Super and Catholic Super on 7.4 per cent.

Mr Rappell cautioned super members not to become too optimistic about strong growth every month from now on.

“Members are undoubtedly pleased to see the back of the sort of volatility we experienced in February,” he said. “But volatility is still high compared to the historic lows of last year, and for the rest of 2018 it is hard to see this theme of volatility disappearing off the radar.

“Central banks have begun to tighten monetary policy in response to inflation expectations, and this will require super funds to navigate a changing global market environment.”

How did your superannuation fund fare? Did it make it onto the Top Ten list? Would you consider switching funds to get a better return?

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Written by Olga Galacho

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