Strong Australian dollar hits super returns in January

SUPER funds fell back slightly last month under pressure from a strong dollar and retreating markets.

Super fund balances took a hit in January / File

SUPER funds retreated last month under pressure from a strong Australian dollar that hit overseas earnings, while local equities and listed property markets pulled back from a strong finish to last year.

Median growth funds retreated 2.2 per cent in the month, while median balanced funds went backwards 1.2 per cent, according to figures from research house Chant West, The Australian reported.

Over a three-year term, superannuation funds remain low performers, with median growth funds down 2 per cent a year and median balanced funds virtually square, showing a negative 0.1 per cent a year return.

Chant West principal Warren Chant said markets were probably due for a breather after running up strongly late last year.

"We had a strong Christmas rally, which was unlikely to be sustained into the new year," he said.

The return figures to investors are after fund investment costs but before any deductions for administration fees or adviser commissions.

Fees are increasingly under debate as official inquiries into superannuation continue, with industry funds claiming their lower fees have led to markedly better returns for fund members.

David Whiteley, chief executive of the Industry Super Network, said the funds' lower fees demonstrated the "clear long-term advantage of industry super funds and the urgent need for the government to address the underperformance of the retail funds sector".

Despite the decade finishing with the worst economic downturn since the Depression, Mr Whiteley said, industry super fund members had posted positive average real returns over the decade, while retail fund members saw their investment returns fall behind inflation.

"In the period 1999-2000 to 2008-09, average annual returns were 4 per cent for industry funds, while retail funds lagged with an average return of 2.4 per cent, according to figures from the regulator APRA," he said.

"In the same decade, industry super funds equalled or exceeded the performance of retail funds in each and every year -- with superior performance in nine out of the 10 years."

Mr Whiteley said the APRA data presented some of the clearest evidence of the need for reform.

"Members in retail funds will be disappointed to know that their investment didn't even keep pace with inflation."

He said $10,000 invested in an average industry fund in 2000 would be worth $14,856 by June 2009, "whereas the same amount invested in a retail fund would be worth only $12,662".

Read more in The Australian.