The median balanced option for super funds returned a “solid” 8.1% in the 2014 calendar year, “exceeding expectations,” said SuperRatings. This follows from a 16.3% gain in 2013 and 11.7% in 2012.
SuperRatings defines a ‘Median Balanced Option’ to mean a 60% to 76% exposure to growth style assets. This covers “approximately 60% to 70% of Australians” in the default investment option of major super funds. The return is net of fees.
As a result the average annual return over the past three years has now reached some 12.0% per annum, more than 9% per annum above inflation. It is worthwhile to note that this figure is actually slightly higher than the return immediately prior to the onset of the GFC.
UniSuper had the top returning balanced investment option, at 10.0%. However it didn’t even make the top ten for the 2013 year – showing that, as SuperRatings says, “past performance is not a reliable indicator of future performance.”
Growth and Capital Stable investment options also had “strong returns,” of 8.6% and 6.1% respectively.
Much of the gain in 2014 is attributable to international shares, which rose 11.5%, assisted by a fall in the Australian Dollar. Domestic shares returned 5.1%. Fixed Interest returned 7.2%, with the median cash option returning just 2.4%.
SuperRatings says that the “story for members remains positive, although significant variation in the returns provided to members exists.” According to their calculations $100,000 invested in the “SR Balanced (60-76) Index” since December 2004 would now be worth $183,974, whereas the same amount invested in the “Best Balanced Fund Over 10 Years” would be worth $210,333. However this would require the super fund member to be “lucky enough to have picked the top performing fund.”
“With average account balances rising strongly, super continues to represent an increasing share of Australians’ wealth, although the variation in outcomes show that reviewing your fund now may pay off handsomely when it comes time to plan your retirement,” said SuperRatings’ founder Jeff Bresnahan.
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