Positive super returns streak comes to a halt

Superannuation funds returns have wavered from the strong momentum going into the new financial year, delivering a median balanced return of -0.1 per cent in August.

The median growth option fell by an estimated -0.3 per cent while lower exposure to shares resulted in the median capital stable option delivering a small positive result, with an increase of 0.1 per cent for August.

This follows a 1.5 per cent median balanced return in July, attributed to the strong performance of energy and commodities while most global and local equities delivered modest returns, and 1.2 per cent in June. 

The last fall was an estimated -0.2 per cent median balanced return in May. 

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According to Super Ratings, super fund returns faced modest headwinds in August while the trajectory for inflation remains a key driver for markets. Additionally, uncertainty around central bank’s rates pathway remains front of mind.

Both Australian and global equities reported small declines over the month with diversification continuing to benefit members in reducing underperformance, it observed.

The median balanced pension option fell an estimated -0.1 per cent while the median growth option is estimated to decline -0.2 per cent.

The more defensive median capital stable pension option is estimated to deliver a 0.1 per cent gain.

“Market uncertainty persists, and we continue to expect monthly fund returns to bounce around,” said Kirby Rappell, SuperRatings executive director.

“However, over the long term, we know funds have a strong record of performing above objectives. The key message for most members is ensuring their settings are right for the long term in order to provide dignity in retirement.”

Performance remains positive overall for the new financial year, thanks to the strong returns in July, though Rappell warned members to be prepared to see more ups and downs over the coming months.

Reflecting on APRA’S 2023 superannuation performance test, which saw 96 trustee directed products and one MySuper product failed to meet the benchmark, Rappell believed monitoring investment performance is a good hygiene factor for members.

“The test has had a significant impact on MySuper default products over the past three years with the only MySuper product to fail the test this year already being closed to new members,” he said.

“The test was also expanded to a broader range of products this year and members who are invested in a failing product will soon be receiving a letter from their fund. 

“If you do receive that letter, make sure you review your investment option or speak with a trusted adviser to understand why it failed and if it’s still suitable for you.”