Super funds need ability to down-side risk

Two super research houses have found super funds in August suffered significant losses thanks to concerns over China.

Chant West's report found the poor performance outweighed the gains in July, so the overall return for the first two months of the 2015/16 financial year was negative at -0.6 per cent.

SuperRatings said August was one of the toughest months funds had seen since the Global Financial Crisis as the median balanced option fell 2.9 per cent.

Both houses found Australian and international shares suffered losses, as did listed property, with Australia and global REITs down four and 5.9 per cent respectively.

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Chant West director, Warren Chant, said "it's when we experience a month like August that we see the benefits of diversification in play."

"The people who are most concerned about their accounts going backwards are those approaching retirement. In many cases, however, either as a result of their own actions or because of the way their fund is designed, by that stage they will be invested in a lower risk option," he said.

"For them, the performance of our conservative category median will be more relevant. This category, which has a lower allocation to listed shares, had its loss in August limited to just 1.1 per cent."

SuperRatings founder, Jeff Bresnahan, said "On the back of concerns about China's growth prospects, falls across major stock markets have made August one of the toughest months for superannuation funds since the Global Financial Crisis"

"With further market volatility expected and ongoing concerns over global economic growth in the coming year, superannuation funds' ability to manage down-side risk will be crucial going forward," Besnahan said.