The sharemarket is falling and that is leading to super funds performing poorly, with AustralianSuper members experiencing negative returns over the last year for the first time since the GFC.
Given AustralianSuper is one of the top performing super funds, the bad news is that if they are doing poorly, then it’s safe to assume that other funds are also experiencing losses.
AustralianSuper members in particular are used to getting an average return of 9.3 per cent, with last year’s returns hitting 20.4 per cent. Fund managers wanted investors not to expect such high returns.
This year, AustralianSuper’s balanced fund reported returns of -2.7 per cent.
AustralianSuper CEO Paul Schoder and Chief Investment Officer Mark Delaney tried to downplay the situation and said to The Australian Financial Review that there were “challenging market conditions” and members should focus on the long term.
They said: “In our experience short-term market volatility may see members worse off in the long run and members in or close to retirement should remember they may be invested for a long time.”
Fortunately, Treasury is reviewing the Your Future, Your Super Laws, which the Association of Superannuation Funds of Australia (ASFA) has reviewed.
ASFA CEO Dr Martin Fahy said: “After two years of operation it will allow the impact of YFYS measures on capital allocation to be assessed and address the challenges it presented for infrastructure and ESG-focused investments.
ASFA has previously expressed concerns that the benchmarking approach could have consequences and distort capital allocation in a way that was inconsistent with delivering strong member outcomes.
Dr Fahy concluded: “If left unchecked this would result in Australians having less in retirement. We are pleased that the new Government has acted quickly and will review the test so that it works in the long-term interests of fund members.”
You can also test the performance of your super by asking the following questions.
Can you beat the market?
If your money is invested with a fund manager instead of a self-managed super fund then you’ve decided that you want to leave the management of your super up to the professionals and that you are happy to pay their fees. Unless you are sure that you can do better than a fund manager you should not shift your money away.
Do you know how to time the market if you exit now?
While it may be tempting to transfer your super to cash the returns are still pretty low, and currently sit at around 1-2 per cent per year. If you do transfer your super to cash will you know when to return? If not then you could lose more money in the long run.
What’s your investing personality?
Some investors are happy to take risks whereas others are not. When investing you need to consider the long term. A return of -2 per cent shouldn’t change how you invest. Swinging between a cautious and risky approach is just asking for trouble. It’s best to remain consistent.
Will you keep investing after retiring?
If you were unlucky enough weather a financial storm in the years leading up to your retirement then of course you will have a reduced retirement fund. If you continue investing even after you retire then you shouldn’t be too worried about diminished returns.
How would you feel if you caused super losses rather than a manager?
How would you feel if your investment losses were caused by your actions rather than those of a fund manager? Fund managers are logical rather than emotional and they react on facts and figures. For example, if someone had a modest super balance of $50,000 and withdrew their money they would have lost $20,000 if they’d pulled their money in the middle of 2020. At retirement that loss could be as high as $60,000. It is good to act, but not react.
You can check how your super fund is performing by using the Your Future, Your Super tool.