‘Continued uncertainty’ weighs on super fund returns

The median balanced superannuation option returned -1.6 per cent in October, according to the latest estimates from research house SuperRatings.

October was the third consecutive month in which the median balanced option suffered a negative return, after declines of -0.1 per cent in August and -1.8 per cent in September.

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“We have observed continued uncertainty around global markets and inflation, which has weighed on returns from shares,” said Kirby Rappell, executive director of SuperRatings.

The S&P/ASX 200 index similarly experienced its third consecutive month of decline in October, with S&P Dow Jones Indices reporting a 3.78 per cent fall for the benchmark index.

SuperRatings said the median growth super option recorded a negative return -1.9 per cent over the month, while the median capital stable option had a more modest decline of -0.8 per cent due to its lower exposure to shares.

The research house noted that, while inflation appears to be moderating, it remains “persistently above target”, leading the Reserve Bank of Australia (RBA) to hike this month.

With the US Federal Reserve also leaving the door open to future rate hikes, SuperRatings suggested that the share market rally seen so far this month may be not be sustainable.

“Despite the uncertain environment of the past quarter, returns remain positive over one through to 20 years,” Mr Rappell added.

“Super funds continue to display strong capabilities in navigating uncertain market environments and members have been experiencing increased levels of ups and downs for some time now.”

Over the past year, the median balanced option has returned 4.2 per cent, the median growth option is up 4.9 per cent, and the median capital stable option is up 2.9 per cent.

The median balanced option has had an average annual return of 5.9 per cent over three years, 5.7 per cent over five years, and 6.5 per cent over 10 years.

Meanwhile, on average each year, the median growth option has returned 7.2 per cent in the past three years, 6.7 per cent over five years, and 7.5 per cent over 10 years.

Finally, the median capital stable option has delivered an average annual return of 2.2 per cent over three years, 3.0 per cent over five years, and 4.1 per cent over 10 years.

“Our message to members remains one of focusing on the long term and sticking with their long-term investment strategy,” said Mr Rappell.

“The ups and downs are likely to continue, and members who are thinking about changing their strategy are encouraged to contact their fund, or speak with a trusted adviser, before making any changes.”