Superannuation accounts set for another year of heavy losses

ONLY a financial miracle will save some Australians from suffering a second year of superannuation losses, a research house says.

Hammered ... billions of dollars have been lost from the balances of Australians' super funds / File

'Only a miracle' will save super in '09

ONLY a financial miracle will save some Australians from suffering a second year of superannuation losses, a research house says.

But most Australians would be better off ignoring short term superannuation pain and look at the longer terms benefits, independent superannuation research house SuperRatings says.

"Apart from some government hand outs, there would appear to be no good news for any Australian who holds investments in other than defensive style assets like cash or fixed interest," the research house said.

Sharp declines in the local equity market and the real estate investment trusts saw median balances in funds with balanced asset allocations record a 1.85 per cent loss during January, dragging the rolling three-year return for these funds down to a loss of 1.86 per cent per year.

So far during 2008/09 balanced option funds have lost 15.1 per cent of their value, SuperRatings said.

For the 12 months to January 31, 2009 the median balanced fund lost 17.7 per cent, with the median Australian shares fund losing 30.7 per cent and the median property fund down 30.4 per cent.

By contrast, funds investing in cash gained 5.3 per cent.

"Only a major financial miracle can prevent Australians from suffering their second consecutive negative financial year return this year after losses of 6.4 per cent in 2007/08," SuperRatings said.

However SuperRatings managing director Jeff Bresnahan says many Australian super funds have delivered sound long term benefits, including investment returns, to their members.

"The longer term performance of Australian super funds actually reinforces the benefits of a balanced portfolio as a long term strategy," Mr Bresnahan said.

Australians should shop around for good performers, he said.

"It is still clear that Australians are costing themselves significant amounts of money by staying put in funds which continually fail to deliver adequate benefits."

Balanced option funds experience significant variations in their five year performance, and outperformed other funds by 6.5 per cent per year during the height of the bull market in 2006 and 2007.

Mr Bresnahan said history supported the benefits of a balanced portfolio as a long term investment strategy, and exposure to asset classes other than cash was still appropriate for investors with an investment time frame of over five years.