Both the Australian and global markets were volatile in August, resulting in the largest monthly loss for balanced funds since February 2009.
SuperRatings founder and chairman Jeff Bresnahan said: “On the back of concerns about China’s growth prospects, falls across major stock markets have made August one of the toughest months for superannuation funds since the global financial crisis.
“While balanced funds experienced losses in August, once again, the benefits of diversification across asset classes within these portfolios was evident, with the declines well below those experienced across most major growth asset classes.”
SuperRatings pointed out that while market fluctuations negatively impacted short-term returns, long-term performance remains strong.
The median balanced option has returned 8.9 per cent per annum over the last five years, with returns over the last 10 years sitting at 6.0 per cent per annum, according to SuperRatings.
Warren Chant, Chant West director, also noted the benefits of diversification.
“It’s when we experience a month like August that we see the benefits of diversification in play,” Mr Chant said.
“Growth funds certainly feel the effects when listed markets fall sharply, but they do have substantial investments in other in sectors, including alternative and unlisted assets, that help cushion the fall.
“So while Australian and hedged international shares both lost more than 6.5 per cent, the typical growth fund member only suffered a loss of 2.9 per cent,” he said.
Chant West reported that industry funds marginally outperformed retail funds in August, with a return of -2.8 per cent compared to -2.9 per cent.
So, alternative and unlisted assets aren’t affected at all and provide a nice buffer. UNTIL they get revalued one day…oh the joys of default industry super where employer money keeps pumping in to replenish liquidity. No wonder they fight so hard against any changes.