Despite the positive trend being quickly reversed following the outbreak of the coronavirus and the ensuing drawdown in markets, super fund returns held up remarkably well over a longer period, SuperRatings said.
Over 12 months to the end of January, the median balanced option returned an estimated 13.8 per cent, while the median growth option return was estimated at 16.2 per cent. Returns over the past seven years are estimated at 8.8 per cent and 9.8 per cent respectively.
Pensions have delivered even higher returns than accumulation products, with the median balanced pension option returning an estimated 15.4 per cent over the 12 months to the end of January, while the median growth pension option had an estimated return of 18.0 per cent. Over the past seven years each have returned 9.6 per cent and 10.8 per cent respectively.
“We expect to see volatility appear more frequently over the course of 2020, but overall our outlook for super funds is positive,” said SuperRatings executive director Kirby Rappell.
“Long-term returns will continue to hold up despite the challenging return environment we find ourselves in at present. Members should look forward to a solid 2020, but expect some bumpiness along the way.
“The funds we’ve spoken to are not responding to the current market situation with knee-jerk reactions. They’re watching developments closely, but so far market volatility has been in line with similar risk events experienced in recent years. Fund investment strategies are generally well placed to manage these types of movements.”
The main problem here is that the majority of industry funds balanced is not actually balanced, it is high growth (usually around 85/15 split). There is also very little diversification away from equities so in the event of a market correction the return of these funds will not hold up.
The compare the pair adverts should be illegal. Go figure.