Super funds see subdued returns as inflation persists

Inflation continued to dampen superannuation fund performance in February and markets could expect volatility in the near future, according to SuperRatings.

Monthly data from the research house found that the median balanced option produced a return of -0.4% during February.

The median growth option and the median capital stable option also decreased by an estimated -0.4% last month, amidst wide economic uncertainty.

As interest rates continue to hike upwards, SuperRatings warned fund members that market volatility would be a continuing trend over the coming months.

VIEW ALL

View all

Despite the monthly data, the past year had experienced modest positive returns, with January noting 3% returns on median balanced options.

Pension rates saw similar subdued results in February, with an estimated -0.5% decrease in the median balanced pension option.

The median capital stable pension fell by the same percentage, whilst the median growth pension option recorded a slightly smaller decrease of -0.4%.

“While super funds are estimated to have had negative returns over February, super fund returns remain much less volatile than equity markets,” commented Kirby Rappell, executive director of SuperRatings. 

This demonstrated the importance of asset diversification and the ability of super funds to weather market conditions with competitive outcomes for their members, he observed. 

Moreover, members close to retirement with a greater reliance on cash returns could see the SR50 Cash index return rising at the same level as the cash rate. 

“For those members seeking more stability or cash flow to support pension withdrawals, rising cash returns will be a welcome trend; however, cash returns remain materially below the current level of inflation and are unlikely to be of benefit for younger members,” added the executive director.