Recent global events, including Japan’s largest-ever earthquake, are expected to impact on superannuation fund returns, according to SuperRatings.
“We estimate that the median balanced fund in March is down by as much as 2 per cent, which has effectively erased the gains made this calendar year of approximately 1 per cent in both January and February,” SuperRatings managing director Jeff Bresnahan said.
Bresnahan said the key to balanced option falls in March was the decline in Australian and international share markets.
“Australian shares in particular will have a large impact, having fallen just over 4 per cent so far this month and down over 7 per cent at one stage,” he said.
“Given the current volatility of the Australian dollar, which has seen it trade as high as US$1.056 and as low as US$0.9794 so far this month, how big an impact international shares’ performance will have this month will depend on funds’ hedging policies.
“An unhedged international shares option will have performed best, losing only about 1 per cent so far this month, benefiting from the Australian dollar’s fall. A fully hedged international shares option will, however, have lost close to 5 per cent.”
He also said world events, such as Japan’s current woes, had put the spotlight on the growth-orientated nature of balanced investment options within Australians’ superannuation funds.
“They do on average hold around 70 per cent in volatile growth-style investments, which are going to bounce around, particularly when markets around the world react to different events,” he said.
“However, as history has shown us, these types of investments are also the most appropriate for the long term, consistently outperforming more conservative assets like fixed interest and cash.
“So, for the average Australian, growth-style investment options such as balanced and growth options should provide the best long-term results, provided one has the time and discipline to see the strategy through.”
