Global turmoil sees super balances take a $44bn hit

TENS of thousands of dollars have been wiped from typical super account balance sheets.

Current market turmoil has wiped more than $40 billion off superannuation / File

HOPES of a bounce-back in super fund returns have been dashed by growing fears about global financial instability and a US economic slowdown that has wiped more than $44 billion from Australians' superannuation savings since the end of March.

But workers who have seen several tens of thousands of dollars wiped from typical account balances may take some consolation from a strong first half to the financial year, with "strong prospects" of a double-digit return for the year, according to research house SuperRatings.

But the latest sharp downturn in equity markets has cut an estimated 3.5 per cent from growth-style accounts where most investors have their funds, according to research house Chant West. The loss last month alone was an estimated 2.7 per cent.

Baby boomers who cheered the recovery from the lows of early last year have seen equity markets slip more than 11 per cent in the past six weeks. From a closing high of 5024 on April 15, the All Ordinaries yesterday closed at 4450 -- a fall of more than 11 per cent.

The Australian Prudential Regulation Authority yesterday released its March Quarterly Superannuation Performance publication, which shows total estimated assets grew over the quarter by $31.8bn, or 2.6 per cent, to a total of $1.26 trillion.

Assets of industry funds were the fastest growing, up 3.6 per cent or $7.8bn to $226.6bn, followed by public sector funds, up 2.7 per cent or $4.7bn to $177.4bn. Corporate funds were up by 1.7 per cent or $1bn to $60.9bn and retail funds were up by 1.6 per cent or $5.5bn to $351.2bn.

Despite the falls, super fund members can take heart from gains earlier in the financial year. Average balanced super funds are up 9.8 per cent in the year to date.

"If the month of June holds up into flat or even slightly positive territory, a double-digit return for the financial year is a strong prospect," SuperRatings chief executive Jeff Bresnahan said yesterday.

"At the end of April, returns were up by almost 14 per cent -- a double-digit return for the year looked quite achievable.

"But the markets have been extraordinarily volatile, where instead of swings of 0-2 per cent in a month, we have seen swings of 4-6 per cent. That makes it difficult to entertain any great certainty of returns."

Like it or not, volatility is here to stay

TWICE in as many years, blood has drained from the faces of baby boomers as they watched their super funds tip over. Last month was a shocker, down 4 per cent, in what looked like the start of another slide into oblivion, and all that means in postponed retirements and changed plans.

Fingers crossed, this month will be better and maybe we will get half-decent fund returns for the financial year, but it is no lay-down misere.

Volatility is the new swear word. Like it or not, you may have to live with it, according to the wise men of finance.

Jeff Bresnahan, of research house SuperRatings, points out that super funds that once swung 2 per cent in a month now swing 4 or even 6 per cent. "A super balance of say $300,000 one month could be $280,000 the next."

Unhappily, such volatility is not going to go away any time soon, according to Shane Oliver, head of investment strategy at AMP Capital Investors. "High private and public sector debt levels in developed countries, extreme swings in monetary policy and greater government involvement in the economy likely mean we have entered a more volatile macro-economic environment," he said.

Volatility. Learn to love it.