Super funds face return downturn
SUPER fund members are due for a downturn after their sixth straight year of positive investment returns.
Research group SuperRatings says the median balanced super fund option — where the majority of Australians hold their savings — has climbed 11 per cent in 2017, the strongest growth in four years.
Rising share markets globally have underpinned the performance, but forecasters say a correction is on the cards as some companies appear overvalued.
But nobody knows if it will be in 2018 or later.
Super fund specialists say the best way to handle a fall is to stick with your existing strategy and ride it out, rather than try to time unpredictable financial markets.
SuperRatings chairman Jeff Bresnahan said many forecasters had expected super fund returns to rise less than 5 per cent this year, “but it’s really smashed that out of the park”.
He said stronger share prices in Australia and overseas had helped, along with good growth for alternative investments such as infrastructure and private equity.
“Most people don’t realise that about 10 per cent of their super fund is in private equity, venture capital and infrastruc- ture,” Mr Bresnahan said. “The expectation is that there’s going to be some sort of correction.
“Quite often these markets keep forging ahead at the time everybody thinks they’re going to crash. It’s possible to have another good year in 2018 but at some point, the market is going to correct itself. I don’t think we are anywhere near a GFC. We’re not looking at a massive correction.”
Investment experts say people should expect a negative return from balanced super funds every five to seven years.
“If there’s a correction tomorrow, you should not try to jump from option to option. We saw in the GFC that people who changed investment options at the bottom of the GFC have missed out on an 80-90 per cent gain in their super fund,” Mr Bresnahan said.
Goldsborough Financial Services director John Oliver said 2017’s super performance had been “exceptionally good, well above long-term averages”. But he added: “Don’t expect it next year. I think markets have been running a bit too hard, too quick.’’