Super in a slump after market fall
THE average superannuation fund lost money last month as share market falls around the world took a toll.
An analysis by research house SuperRatings found the median balanced fund slipped 0.3 per cent during February.
For pension funds – those in the payout phase – returns fell 0.4 per cent.
The fall for the median balanced fund is the first for any month since January last year, when there was a 0.1 per cent decline.
The latest result compares with a 0.9 per cent increase in January this year and takes the total return for the financial year to date to 6.4 per cent.
Plunges in several key global share markets were the main cause of the lower returns, although most, including Australia’s, managed to recover most of their losses by the end of February.
Despite the volatility, longterm returns from balanced super funds remain strong, averaging 9 per cent a year since the nadir of the global financial crisis in 2009.
SuperRatings chief Kirby Rappell warned people against switching options and jumping out of shares during a downturn.
“Recent data also reveals the risk for members in trying to time the market ... and the cost of potentially switching products due to a relatively short period of underperformance,” Mr Rappell said.
“A flight to relative safety in times of volatility can have long-term effects on investment performance.”
If a super fund members in “growth” funds had switched to balanced funds at the depth of the financial crisis last decade, they would be $17,700 worse off for every $100,000.
Chant West spokesman Mano Mohankumar also said short-term volatility should not impact long-term savings decisions.
“A month like February can really highlight the benefits of diversification,” Mr Mohankumar said.
“Even though a fund might have 55 per cent invested in listed shares, there is still a very meaningful 45 per cent invested in other asset classes.”