Super funds face volatile outlook after small return for August

The average superannuation balance eked out a small gain in August following a $100bn wipeout on the ASX.

Fears in early August that the US was facing a recession weighed on super funds’ returns. Picture: AFP

Global sharemarket volatility has weighed on the performance of Australia’s $3.9 trillion superannuation sector since the start of the new financial year, with SuperRatings warning that such conditions are likely to continue.

August was a turbulent month for markets, leading to some swings in superannuation returns with a strong downturn in the first two weeks followed by a swift recovery.

Overall funds managed a small gain for members with superannuation research house SuperRatings estimating that the median balanced option returned 0.4 per cent over August.

“The first two months of the new financial year have seen greater volatility returning,” SuperRatings executive director Kirby Rappell said.

“Sharemarkets have had a strong impact on fund returns. However, the need to focus on long-term outcomes rather than getting caught up in daily movements is as important as ever.”

August was a turbulent month for investors as August 5 marking the worst trading session on the ASX 200 since the start of the Covid-19 pandemic in 2020 on fears that the US economy could be drifting towards recession. Investors wiped more than $100bn off the local sharemarket as the benchmark index fell 3.7 per cent.

The bourse, however, recovered throughout the remainder of August to end the month slightly down on where it started.

Mr Rappell said whether members should take any action around their investment choice would depend on their personal risk appetite and the time left until they needed to start drawing down on their super balance, with volatility expected to continue.

“Superannuation is a long-term investment for most and funds have consistently delivered good long-term outcomes,” he said.

“However, for those worried about how their super is doing in these conditions there are a lot of resources available to support members in making the choice most suitable for their situation.”

The median growth option grew by an estimated 0.3 per cent in August, while the median capital stable option, buffered by a lower exposure to shares, rose an estimated 0.5 per cent.

Pension returns followed a similar pattern. SuperRatings estimated the median balanced pension option rose by 0.4 per cent in August, the median capital stable pension option lifted by 0.6 per cent and the median growth pension option increased by 0.3 per cent.

International markets, particularly the US, have powered ahead in the past 12 months despite higher inflation and rates, as well as geopolitical uncertainty, with the S&P 500 up 23 per cent, the Dow Jones rising 17 per cent and the Nasdaq gaining 22 per cent.

The ASX 200 has lifted 11.1 per cent since this time last year.

SuperRatings estimated the median balanced option returned 10 per cent over the year to August.