Another negative forecast for super
AUSTRALIAN super funds could notch up their first negative performance since the pandemic as global share markets remain volatile.
In April, it is estimated that the median growth fund was down 1.2 per cent. The decline has reversed a small increase that occurred in March, which is now resulting in the median return over the first 10 months of the 2021/22 financial year sitting at 1.2 per cent.
With the sharemarket volatile due to the war in Ukraine, lockdowns in China, continued supply delays and a rise in interest rates, Chant West analysts are predicting the financial year return is near break-even at -0.5 per cent.
If growth funds do finish the year in negative territory, it will only be the fifth time since the introduction of compulsory super in 1992.
Chant West senior investment research manager Mano Mohankumar said super fund members should feel comfortable in how well super funds can rally through tough times.
“The last time we saw a loss was in 2020 and it was limited to 0.6 per cent despite the Covid-induced sharemarket meltdown in February/March 2020,” he said.
“Super fund members need to remember that super is a long-term investment and not to get distracted and caught up in the short term. If you make decisions based on short-term outcomes, you can hurt your long-term investment.”
The Reserve Bank recently increased the interest rate for the first time since November 2010 to 0.35 per cent as a result of fast rising inflation while international share markets plummeted by 7 per cent.
SuperRatings executive director Kirby Rappell said rising interest rates may have a dampening effect on share prices that could impact people’s super returns but could also improve returns for members with more cash exposure as part of their investment.
“For members closer to retirement, there’s more cash exposure with their super fund investment as they look for greater certainty and less vulnerability,” Mr Rappell said.
“It’s been a really challenging spot to be for some time.”