Riding out market volatility best long-term strategy
It's been a bumpy ride recently for superannuation fund members, who have experienced six negative monthly returns over the past year.
According to fund researcher SuperRatings, the median balanced option return dropped 0.5 per cent in August, driven by a fall in Australian and international shares. The median growth option, which has a higher exposure to shares, fared even worse, declining 0.9 per cent.
However, long-term returns are still holding up well, with the median balanced option for accumulation members delivering 9.2 per cent per annum over the past seven years.
“There will always be bleak months for super members, but the timing of negative returns can have a real impact on those entering retirement,” said SuperRatings executive director Kirby Rappell.
"As members get closer to retirement, it’s important that they review their risk tolerance to make sure they can retire even if the market takes a turn for the worse,” he said.
Still, most fund members are better off riding out short-term market volatility, rather than switching out of their current investment option in favour of something safer, SupeRatings data show.
The benchmark SR50 Balanced Index took a dive in the December quarter of 2018, only to rebound strongly through to the end of July 2019.
Switching a starting account balance of $100,000 to a more capital stable option at the end of December would have meant missing out on $4,384 by the end of July, according to the researcher.
“The lesson for investors is that switching in response to short-term market movements is not a good idea,” Mr Rappell said.
Equip Super and Catholic Super appoint new CIO
New joint venture Equip Super and Catholic Super has appointed of Anna Shelley as chief investment officer for both funds.
Ms Shelley (pictured) was formerly CIO of the stand-alone Catholic Super fund. Before that, she was general manager, product and strategy at Perpetual.
Equip Super and Catholic Super will begin joint operations in October to create Australia’s 10th largest profit-for-member super fund.
Ms Shelley’s appointment follows that of Scott Cameron, former chief executive of Computershare, as CEO of the venture.
Backers of the fund, which has $26 billion in funds under management, have forecast it could double in size to $50 billion within five years, after fielding expressions of interest from a number of funds about joining the group.
Australian Ethical donates to communities
Australian Ethical, one of the country's leading ethical super fund managers, is donating $360,000 to 20 grassroots organisations that help create better outcomes in communities.
Selected from more than 380 applications, each of the winners will receive a grant of up to $20,000.
Among those chosen by Australian Ethical's 41,000 members include Friends of the Koala, the Hobart Women’s Shelter and Greyhound Rescue.
So far, more than $3.8 million has been donated in the fund's community grants program.
Australian Ethical's balanced option was one of the top performers in the sector in the year ended June 30, with a return of 11.4 per cent. It has returned 8.2 per cent over five years.
Strong inflows to spur super growth
The Australian superannuation system was worth $2.87 trillion as at June 30, 2019 – up more than 5.6 per cent over the year-earlier period. It is expected to grow by more than 25 per cent to $3.64 trillion over the next three years, fuelled by an additional $40 billion to $50 billion in member contributions each year.
The sector's growth will also be supported by an increase in the government's super guarantee, which will begin a staged rise from 9.5 per cent to 12 per cent in over the next six years. The next scheduled increase is to 10 per cent on July 1, 2021.
Super Guarantee increases: Current – 9.5 per cent; July 1, 2021 – 10 per cent; July 1, 2022 – 10.5 per cent; July 1, 2023 – 11 per cent; July 1, 2024 – 11.5 per cent; July 1, 2025 – 12 per cent.