Australian superannuation funds fell in value by 0.4% in September on the back of weaker international and local share markets, industry analysts Chant West said.
The fall brings the return so far this financial year for the median growth fund back to 0.8%, they said.
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Difficult month across the board
Chant West Head of Superannuation Investment Research Mano Mohankumar said September was a challenging month for investment markets with shares and bonds retreating amid rising bond yields, increasing oil prices and sticky inflation.
He added:
Australian shares slipped 2.4% while developed market international shares fell 0.7% in hedged terms. With yields rising, bonds offered little protection, with Australian and international bonds down 0.9% and 1.7%, respectively. Despite all of that, the loss for the median growth fund in September was limited to 0.4%, with the Australian dollar playing an important diversification role as it depreciated from US$0.72 to US$0.69 over the month. That translated the 0.7% hedged loss on developed international shares into a solid gain of 1.9% in unhedged terms, while emerging markets shares rose 2.4%. On average, super funds hold about 70% of their international shares unhedged. Funds' unlisted asset exposures also helped cushion the impact.
In terms of the different risk settings, all growth funds shed 0.6% for the month, while conservative, balanced, growth and high growth all fell 0.4%, Chant West said.
Mr Mohankumar said it was important to remember that superannuation is a long-term proposition.
He added:
Since the introduction of compulsory super in July 1992, the median growth fund has returned 8% p.a. The annual CPI increase over the same period is 2.7%, giving a real return of 5.3% p.a. – well above the typical 3.5% target. Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020, and the high inflation and rising interest rates in 2022 – super funds have returned 6.7% p.a., which is still ahead of the typical objective.
Longer-term picture is rosy
Chant West said the median growth fund has, for the past couple of decades, exceeded its return objective over rolling 10-year periods, except for two periods between mid-2008 and late-2017.
They added:
This is because of the devastating impact of the 16-month GFC period (end-October 2007 to end-February 2009) during which growth funds lost about 26% on average.
The S&P/ASX 200 Index (ASX: XJO) fell almost 3.2% in September to end at 8,789.3 points.
Some of the companies which performed well included Codan Ltd (ASX: CDA), Ingenia Communities Group (ASX: INA)and Reliance Worldwide Corporation Ltd (ASX: RWC).
