Super funds heading for disappointing, but positive, 2018/19 returns

Super funds are likely heading for a disappointing, though positive, investment return for the 2018/19 financial year.

SuperRatings said super funds were facing a “grim” financial year, given challenges to global growth following “sharp” losses in the December quarter.

SuperRatings has the ‘median balanced option’ at 3.2%, which “so far ranks as the seventh worst result since the introduction of the super guarantee in 1992”.

“While funds have recovered from a horror December quarter, a weakening outlook will make it challenging for funds to make up further ground before 30 June,” said SuperRatings.

Both SuperRatings and Chant West found their measure of the median fund was up 0.8% in March 2018. On Chant West’s figures, this puts the median growth fund up 6.0% over the March quarter, and up 3.3% for the 2018/19 financial year so far.

According to Chant West, Australian shares were up 10.9% over the March quarter. International shares were up 12.7% when hedged for currency fluctuations, or 11.5% unhedged. Australian REITs were up 14.4%, while international ones were up 14.5%.

“The 6% rise for growth funds over the March quarter more than offset the 4.6% loss over the December 2018 quarter,” said Chant West senior investment research manager Mano Mohankumar.

“With the financial year return sitting at 3.3% and share markets up in April so far, super funds are back on track for a 10th consecutive positive financial year result.”

“The V-shaped pattern experienced by share markets over the past six months provides a valuable lesson for fund members. The worst thing you could do after the December quarter falls would have been to switch into cash or a conservative option with a lower exposure to shares. Not only would you have locked in the losses, but you would also have missed out on the March quarter rebound. As always, the message is to choose an appropriate option and stick with it.”

Though Mohankumar warned: “While the March quarter was strong, we would caution members not to get carried away”.

As is often said, past performance is not an indicator of future performance.

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