Negative news shifts the balance

Huge hit to retirement savings

MILLIONS of superannuation fund members across the nation are staring down the barrel of their first negative returns since the global financial crisis, with estimates of the potential dip in retirement savings ranging as high as 5 per cent.

The nation’s largest superannuation fund, AustralianSuper, kicked off the super fund reporting season on Monday, telling its 2.7 million members that its balanced option – which 90 per cent of them are invested in – delivered a return of -2.73 per cent for the financial year.

And all are warning that the strong bounce-back in super fund returns which occurred in the 2021 financial year is unlikely to be replicated any time soon, as interest rate increases, inflation and global political turmoil continue to unsettle investment markets.

AustralianSuper delivered the first negative return for its balanced fund since 2009, when member balances fell 13.3 per cent in the wake of the GFC.

Unlike many funds which turned negative as the pandemic hit in the 2020 financial year, AustralianSuper squeaked over the line with a 0.52 per cent return in that period before delivering a barnstorming 20.43 per cent gain in 2021.

But the fund’s chief investment officer, Mark Delaney, is warning members not to expect similar results any time soon, saying returns would be “more modest” over the medium term.

“After more than 10 years of economic growth our outlook suggests a possible shift from economic expansion to slowdown in the coming years,’’ he said. “In response, we have started to readjust to a more defensive strategy, as conditions become less supportive of growth asset classes such as shares.’’

Mr Delaney pointed out that the balanced fund had returned 9.32 per cent annually over the past decade, and urged members not to react to short term market volatility.

“As a long-term investor, we know from experience that while periods of market volatility can be unsettling, they also create new investment opportunities,’’ he said.

AMP Capital chief economist Shane Oliver said balanced funds were estimated to have fallen 3-5 per cent, as events conspired to deny fund managers traditional defensive plays such as bonds.

“I reckon over the next 12 months we will see a rebound but it’s not going to be as strong as the 2020-21 period,” he said.

Chant West senior investment research manager Mano Mohankumar said his organisation was expecting the median balanced fund to return between -3.5 and -4 per cent.

“Those are the investment options that have between 61 and 80 per cent allocated to growth,’’ he said.

SuperRatings executive director Kirby Rappell said his organisation was predicting a 3 per cent decline for most balanced funds, with AustralianSuper tending to outperform its peers.