Super funds at risk of first annual loss

Superannuation fund members might be at risk of their first annual loss in seven years, after recording a third consecutive month of negative returns in November, according to SuperRatings.

The data showed a negative return of -0.6 per cent in November for members invested in the median balanced option, which followed an earlier decline in October of -3.1 per cent, bringing the 2018’s calendar year-to-date return to just 1.8 per cent, the firm said.

This was driven mostly by the continued market volatility as well as ongoing market weakness in December, which was expected to “eat away at what is left of super’s gains through 2018”.

Members who invested in the median growth option saw an annual return of 1.2 per cent while those with an exposure to Australian equities suffered a significant decline in November of -2.4 per cent.

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By comparison, those invested in the median international equities option saw returns year-to-date of 2.1 per cent, despite heavy losses in October (-5.8 per cent) and smaller losses in November (-0.4 per cent).

However, according to SuperRatings, super members still remained well ahead over a ten-year period, with $100,000 invested in the median balanced option in November, 2008, now worth $206,366 while the median growth option was worth $217, 721 over the same period.

SuperRatings’ executive director, Kirby Rappell, said that members of super funds should be ready for more volatile markets in the coming months.

“Heading into 2019, it looks like members will need to get used to some of the volatility we’ve seen in markets over the past two or three months,” he said.

“This is certainly a challenging environment for super funds at the moment. Share markets are under pressure globally, and recent data indicate that the economy is weaker than expected, with downside risks including a softening housing market having a real impact on confidence.”