Super funds return 10.4%

The average superannuation fund returned 10.4 per cent for the financial year to 30 June 2017 and funds that had higher allocations to unlisted assets excelled, according to SuperRatings.

The research house’s latest report estimated that $140 billion would be added to super accounts in investment earnings for the year, and the eighth consecutive year that super funds had delivered positive returns to members.

SuperRatings found that industry funds dominated performance tables with leader HOSTPLUS delivering a return of 13.2 per cent for its balanced fund. This was followed by AustralianSuper’s balanced fund which returned 12.4 per cent.

SuperRatings chairman, Jeff Bresnahan, said: “Over the last five years alone, funds have averaged 10 per cent earnings every year, more than erasing the pain of the GFC [global financial crisis] and putting retirees in a significantly improved position than they could ever have hoped for”.

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The research house said fund that excelled this year t ended to go against the investment trend by having higher allocations to unlisted assets, which traditionally came at a significantly higher cost than the increasingly popular passive strategies.

“This once again debunks the argument that low cost investment strategies are good for Australians. Low cost passive strategies will only guarantee chronic regular underperformance, which will impact retirement benefits for all Australians and undermine the superannuation system,” SuperRatings said.

Bresnahan noted that global shares had been the main driver of returns over the decade, and 2016/17 was no exception, with the MSCI World Index returning 15.4 per cent versus 14.4 per cent from ASX200 shares.

The report also said that while accurate figures were difficult to obtain from the Australian Taxation Office, they believed that self-managed superannuation funds would have significantly underperformed against mainstream super funds over the financial year to 30 June 2017 due to their lack of diversification.

“Consumer sentiment is at its weakest since August 2016 when the RBA [Reserve Bank of Australia] cut rates, and June saw a sharp fall in confidence around the broader economy. At the very least, Australians can have faith in our superannuation system, which has now built up an enviable track record,” Bresnahan said.