Post-GFC returns a “windfall” for super fund members taking long view

Superannuation funds have accumulated more than $1 trillion in the decade since the start of the GFC, creating a “windfall” for fund members who took a long-term view, says SuperRatings.

SuperRatings calculates that a super fund member who had a balance of $100,000 just before the start of the GFC would today have $193,887 if they stayed in a balanced investment option. Someone who shifted to a capital stable option would have $164,227, $29,610 less. Remaining in a growth option over the decade would have grown the $100,000 to $201,209.

SuperRatings says these figures show the importance of taking a long-term view, even in times of severe crisis.

“The failure of Lehman Brothers ushered in a period of intense crisis for the global financial markets, including in Australia,” said SuperRatings Executive Director Kirby Rappell.

“We hoped then that the market crash would prove cyclical and that we would see a relatively quick recovery, but of course that did not happen.”

“But even in the face of the Great Recession, Australia’s superannuation funds have shown us that taking a long-term view and sticking with your investment strategy pays off. Super funds held their nerve and refrained from making rash decisions, and members continue to reap the benefits. After 10 years the GFC looks more like a speed hump.”

“The lesson of the GFC is useful to bear in mind when confronting the risks and uncertainties in today’s market.”

“There are some significant risks, including the threat of tariffs on global trade and investment, central bank tightening, and the currency and bond crisis that has engulfed emerging markets. Funds need to maintain discipline and stick to their long-term return objectives in the interest of their members.”

SuperRatings finds that the ‘median balanced option’ grew by 1.0% in August, compared to 1.3% for the ‘median growth option’.

Shares and currency driving super funds returns in August

Shares and movements in currency have been driving the returns of superannuation funds in August, according to Chant West.

The firm found that the ‘median growth fund’ – with 61% to 80% in growth assets – was up 1.0% for August, following from 1.1% in July. This “solid result” was “mainly due” to strength in listed shares and movements in currency.

Australian shares gained 1.4% in August, while international shares were up 1.3% hedged or a “lofty” 4.1% unhedged – as the Australian dollar fell from around 0.74 US dollars to around 0.72. According to Chant West super funds have on average around 70% of their exposure to international shares unhedged.

Listed property had a “good month”, with Australian REITs up 2.6% and international REITs up 1.2%.

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