Super funds experience strong recovery

Australia’s superannuation funds bounced back from earlier losses in July, with the median balanced option delivering an estimated return of 3.1 per cent for the month.

According to analysis by SuperRatings, the strong performance of equity markets in Australia and overseas were the key drivers of the recovery. In particular, the firm highlighted the S&P/ASX 300 Information Technology Sector Index, which posted a return of 15.4 per cent.

“It is pleasing to see a strong recovery over the month of July demonstrating the resilience of super funds and their ability to navigate the uncertain investment environment,” said SuperRatings executive director Kirby Rappell.

“While we are likely to see bumps ahead, the long-term trend for super funds has remained strong and steady.”

For July, returns for the median growth option were estimated to be up by 3.5 per cent while the median capital stable option returned 1.9 per cent.

Previously, SuperRatings reported that the median balanced fund suffered a 3.4 per cent decline in June to be down 3.3 per cent for the 2021-22 financial year.

Following July’s recovery, the median balanced option has now returned -1.6 per cent over the past calendar year, along with a -2.1 per cent return for the median growth option and a -1.2 per cent return for the median capital stable option.

“We’ve been emphasising the importance of focusing on the long term and amid the recent market uncertainty, it’s understandable that people have been concerned about the ups and downs in their account balances,” said Mr Rappell.

Looking further back, SuperRatings estimated that the median balanced option had delivered an average annual return of 4.9 per cent over the past three years, 6.6 per cent over the last five years and 8.3 per cent during the past decade.

“This year, we have seen the ongoing challenges of COVID-19 coupled with a challenging global economic environment driving the volatility,” Mr Rappell noted.

“We continue to highlight the importance of setting your long-term investment strategy and the performance over the last month shows the perils of trying to time the market, with members who may have switched to more conservative investment options missing out on the bounce back.”

Meanwhile, SuperRatings recently estimated that, based on their performance through to the end of June, nine out of 10 Choice options would have passed APRA’s annual performance test had it been expanded beyond MySuper products this year.

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.