Superannuation funds take biggest hit in 20 years

FALLS in the share market have wiped an estimated $50 billion off the value of workers' superannuation funds.

Market falls wipe $50bn off super savings

SUPERANNUATION funds are poised to post their biggest loss in 20 years after being rocked by falling stock markets.

Falling markets have wiped an estimated $50 billion off the value of workers' retirement savings.

But analysts say that the fall is minor compared with the 50 per cent gain funds have produced since 2003.

"It's a pretty big drop but you have to put it in perspective," said Jeff Bresnahan, managing director of research house Superratings.

Superratings figures show that balanced funds have suffered a 5.2 per cent decline so far this financial year.

Mr Bresnahan said returns would vary dramatically from fund to fund, according to their exposure to different asset classes and fees they charged.

He said funds had been down 7 per cent at the start of the year but had recovered in line with stock markets to be only 2.5 per cent down at the end of May.

But this month's stock market slump has wiped out much of these gains.

Mr Bresnahan said markets would have to stage a huge recovery in the next two weeks for funds to produce a profit.

But he warned against pulling out of super without a good reason.

"If the ASX moves a couple of hundred points, then that translates into a couple of per cent in a super fund," Mr Bresnahan said.

"And the market can move 200 points in a day, so it can recover very quickly.

"It can recover 3 or 4 per cent in a week.

"If you are trying to time the market, trying to jump in and out of cash and shares and balanced funds, it is a bloody hard game and generally adds up to not a win."

Balanced funds generally invest about 32 per cent of their money in Australian shares, 23 per cent in international shares, 16 per cent in fixed interest investments, 14 per cent in property, 10 per cent in alternative investments and 5 per cent in cash.

At the end of April, Australian share funds had dropped 7.7 per cent, international shares had fallen 11.6 per cent, and property was down 3.8 per cent.

Fixed-interest funds were up 3.8 per cent and cash was up 3.99 per cent.

Mr Bresnahan said an investor with $100 in a fund in 2003 would have seen it rise to about $160 then drop back to $155.

"If someone had said to investors five years ago: 'We will give you 50 per cent between 2003 and 2008', everyone would have said 'Yes'," he said.

"And that is effectively what has happened.

"It doesn't mean you have had a bad time. You've actually had a really positive return."