The median balanced superannuation option delivered a 1.2 per cent return during June, strengthening an already positive annual return to 8.5 per cent for the year to 30 June 2023, according to the latest estimates from research house SuperRatings.
This follows on from the -3.4 per cent return last financial year, demonstrating the industry’s ongoing ability to navigate an uncertain market environment.
Commenting on the results, executive director of SuperRatings, Kirby Rappell said, “While there are significant conversations about interest rate rises, inflation, and global uncertainty front and centre within the economy, it is reassuring to see superannuation funds’ ability to deliver a competitive outcome for everyday Australians.”
He noted that while economic pressures are hard to ignore, “superannuation continues to perform well on a long-term basis with most funds managing to keep performance in line with the typical CPI+3.0 per cent investment objective over 10 and 30 years”.
“We expect funds may struggle to meet their inflation plus objectives over the short term, particularly as inflation remains elevated, however, super funds have done well to capitalise on the opportunities available to ensure members’ super account balances continue to grow. While the current cost of living is certainly putting pressure on many Australians, superannuation continues to play its part for people’s longer term financial outcomes.”
Moreover, SuperRatings estimated that the growth option returned an estimated 1.4 per cent over the month, while capital stable options which hold more traditionally defensive assets such as cash and bonds returned 0.3 per cent.
Historically, the ratings firm found, the average annual return since the inception of the superannuation system is 7.1 per cent, with the typical balanced fund exceeding its long-term return objective of CPI+3.0 per cent.
International equities, Australian equities, and listed property were the top performers for super funds this year, contributing to strong overall performance, the firm said. However, unlisted assets, including unlisted property, negatively impacted returns as many funds had to write down their valuations, despite their historically good performance and diversification benefits.
Defensive options with smaller equity allocations and modest fixed interest returns had a challenging year, but cash options offered some relief with increased returns due to central bank rate hikes.
“Twelve months ago, we did not anticipate an 8 per cent return for this year and so, many people would see this as a positive,” said Mr Rappell.
“Further, long-term returns remaining strong. However, we expect the ups and downs observed over the last 12 months to continue and members should be prepared for their balances to fluctuate.
“If you are not approaching or in retirement, keep in mind that all market movements in the short term are not likely to be what you are thinking about when you retire in 20 or 30 years’ time.”
Ok what were returns for normal investments versus off balance sheet investments