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Super funds deliver positive returns as inflation continues to bite

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3 minute read

SuperRatings has published its estimates for April’s super fund returns.

The median balanced superannuation option delivered a 1.2 per cent return during April, according to the latest estimates from research house SuperRatings.

Continued momentum in local and global equities was said to have been the driver of April’s positive super returns, with SuperRatings estimating that the median growth option was up by 1.4 per cent for the month and the median capital stable option was up by 0.7 per cent.

But the research house noted that inflation still remains well above the targets of central banks, with the Reserve Bank of Australia (RBA) delivering a surprise 25 basis points hike this month.

“The strong financial year to date return will be welcome news for members after last year’s losses as well as some bumpy months at the start of this financial year,” commented SuperRatings executive director Kirby Rappell.

“However, these returns and latest inflation figures demonstrate the challenge facing super funds, the economy, and everyday Australians.”

The latest consumer price index (CPI) from the Australian Bureau of Statistics (ABS) showed that inflation rose by 7 per cent over the year to March.

“Most funds over the longer term are targeting a return of inflation plus 3 per cent per annum for their members invested in the balanced option,” Mr Rappell explained.

“Put simply, super funds are on track to return around 8 per cent thus far this financial year, despite this also being behind an objective of inflation plus 3 per cent. What it reinforces is that super remains a long-term game and that returns are holding up pretty well, despite the challenges that funds and their members are facing to adapt to a higher inflation environment.”

SuperRatings estimated that the median balanced option returned 3.2 per cent over the past 12 months, with an average annual return of 8.3 per cent over three years, 6.0 per cent over five years, 7.0 per cent over seven years, and 7.4 per cent over 10 years.

The median growth fund was estimated to have risen 3.6 per cent during the past year, with an average annual return of 9.9 per cent over three years, 7.0 per cent over five years, 8.1 per cent over seven years, and 8.6 per cent over 10 years.

The research house also estimated that the median capital stable option was up 2.2 per cent over 12 months and had delivered an average annual return of 3.7 per cent over three years, 3.3 per cent over five years, 4.0 per cent over seven years, and 8.6 per cent over 10 years.

“We expect to see continuing volatility in returns, despite the strength with which volatility has been navigated to date,” Mr Rappell said.

“Setting long-term strategy remains the best approach to long-term success. While fund performance may struggle to significantly outpace inflation in the current environment, over the long term they continue to perform well.”

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.