Super funds feel pain

Tough year delivers negative annual returns

SUPER funds limped to the end of 2022 deep in the red, with market turbulence delivering negative annual returns for only the fourth time since 2000.

The median balanced fund returned negative 4.8 per cent for the 12 months through to the end of December, with property and equities to blame for much of the decline, according to research house SuperRatings.

Just two balanced options delivered positive returns for the year: The Perpetual Balanced Growth Fund, with a 1.7 per cent return, and First Super’s balanced option, which eked out a 0.1 per cent gain.

Among the other top 20 funds for the year, which include Hostplus, Australian Retirement Trust and Hesta, the returns ranged from between negative 2 per cent and negative 4.4 per cent.

But the nation’s largest super fund, the $130bn AustralianSuper, failed to deliver any outperformance, instead returning negative 4.8 per cent in line with the median result.

It is just the fourth time balanced funds recorded a full calendar year of negative growth, with 2022’s performance outstripping the negative 1.9 per cent returned in 2011 and in line with the negative 4.8 per cent delivered in 2002.

Still, none compares with the negative 20 per cent recorded in 2008.

Balanced funds were hit with simultaneous falls in stocks and bonds in 2022. These funds typically allocate about 70 per cent of their assets to stocks and about 30 per cent to bonds.

Economic reopening combined with unprecedented stimulus and supply chain disruption during the Covid-19 pandemic caused persistently high inflation, which led to aggressive interest rate hikes by the world’s major central banks through the year, including the Reserve Bank of Australia.

“Super funds experienced a turbulent 2022 with heightened inflation driving ongoing interest rate rises and throwing international markets into periods of significant uncertainty,” said SuperRatings executive director Kirby Rappell.

Mr Rappell said the disappointing returns were driven by falls in property and international shares, further impacted by fixed interest failing to act as a safety net.

Mr Rappell pointed to the long-term performance of super.

“While members may be disappointed with this year’s performance, if we look at the long term, funds continue to perform well against objectives,” he said.

“With more uncertainty ahead, it remains important to set your strategy and try to ignore the current market noise to increase the odds of long term success.” Long-term, super returns have averaged 6.1 per cent a year since 2000.

Hostplus’s balanced option has been the top performer over the long-term, with an average annual return of 9.1 per cent. This is followed by AustralianSuper and Australian Retirement Trust, with average yearly returns of 8.8 per cent and 8.6 per cent.

“We expect more ups and downs for markets over the coming months, with the path of inflation and the related interest rate movements remaining the key driver for whether funds can provide a positive return to members or not,” Mr Rappell said.