Super funds claw back losses but still end year in red

Super funds staged a strong recovery from the steep losses of the March quarter but it wasn’t enough to finish the year in positive territory.

Super funds have clawed back some of the steep losses suffered in February and March as equity markets collapsed, but still ended the year in the red. Picture: Damian Shaw

The nation’s super funds clawed back a portion of the losses suffered in the March quarter at the height of the coronavirus crisis, but the momentum wasn’t enough to push them into positive territory for the year, with the ­median balanced option still finishing in the red, according to ­research house SuperRatings.

After a crippling sharemarket correction in the March quarter, the median balanced option benefited from the recovery in equities in the last three months of the year, returning -1.2 per cent for the 12 months to the end of June.

The median growth option fared nearly as well, recovering to return -1.6 per cent for the year.

Despite ending the year in negative territory, the return was better than the industry had expected just weeks ago and not nearly as severe as investors suffered through the global financial crisis, which saw 2008’s return plunge to -6.4 per cent and 2009’s hit -12.7 per cent.

“Super funds made a strong comeback in the June quarter, but the market remains challenging due to the degree of uncertainty surrounding the COVID-19 pandemic,” SuperRatings executive director Kirby Rappell said.

“While markets have shown signs of stabilising, which is good news for members, we don’t want to get ahead of ourselves. Members want to see a sustainable recovery in their balance, rather than a rapid rebound followed by another dip. Slow and steady is the way to rebuild.”

Super funds still have some ground to make up from the February and March sell-off, which stripped close to 10 per cent from the median balanced fund at the market low.

Since the start of the 2020 calendar year, the median balanced option has fallen 5.1 per cent, while the median growth option is down 6.7 per cent, according to SuperRatings.

The capital stable option, which includes more defensive assets such as bonds and cash, has fared relatively better, falling only 1.6 per cent.

As Victoria battles a spike in infections, Mr Rappell warned investors to prepare for more market volatility.

“There have certainly been some positive developments recently, although we remain in challenging times as markets seek a way forward, with the low interest rate environment creating an extremely challenging outlook for those members near the retirement phase searching for meaningful and sustainable income,” he said.

“For members, it means they will need to be prepared for some more ups and downs. However, a patient approach has paid off for members over the long term, with the median balanced-style fund returning 7 per cent per annum since the introduction of superannuation in 1992.”