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12-month super returns below average

Ongoing political uncertainty and spikes in volatility have held superannuation returns for the 12 months to 30 November below their seven-year average, according to research company SuperRatings.


The company found that median balanced super fund returned around 5 per cent during the 12-month period, below the 7.6 per cent per annum average the sector has seen for the last seven years.

SuperRatings said that returns had been constrained by a “shock to the system” earlier in 2016 followed by ongoing “volatility spikes” throughout the year, but noted that the rally in equities following Donald Trump’s victory at the US election polls had been positive for superannuation investors.

“The turnaround in equity markets has been remarkable, and has resulted in a significant boost to superannuation fund balances in November,” said SuperRatings chair Jeff Bresnahan.

“The median balanced option has returned an estimated 3.3 per cent in the five months since June and 5 per cent over 12 months, underlining the strength of superannuation despite a tumultuous 2016.

Mr Bresnahan cautioned investors that volatility is likely to remain as markets adapt to the new political landscape and that recent gains may not be sustainable.

Chant West director Warren Chant also noted  several political events on the horizon which could impact returns, notably the impact of the European Central Bank's nine month extension to its quantitative easing program and the UK's intention to depart the European Union.

“Closer to home, in China, diplomatic sensitivities were ruffled when President-elect Trump took a call from the Taiwanese president. More importantly, Trump has canvassed protectionist policies that, if enacted, have the potential to set off a trade war that could be damaging to China – and, by extension, to Australia,” he said.

Despite this, Mr Chant said that 2016 was still on track to deliver a "seventh positive calendar year return in the past eight years" with Australian and international shares up 2.8 and 2.6 per cent respectively and the Australian dollar down to $0.74 from $0.76 over November alone.

 

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