Super Funds Milking The Cash Cow Fare Best
Sydney Morning Herald
Tuesday November 25, 2008
THE worst returns on record for superannuation funds are bringing the global credit crisis into the homes of millions of Australians.
In the year to October 31, the return on median balanced funds dropped an "unprecedented" 17.6 per cent, said the research group SuperRatings. The same funds dropped 6.7 per cent last month, during which equities fell their furthest since the crash of 1987. "Australian super funds are facing their biggest challenge since the introduction of compulsory superannuation in 1992, with the fallout of the international financial crisis affecting nearly all institutions," the managing director of SuperRatings, Jeff Bresnahan, said. SuperRatings found that cash continued to provide the best return, ranging from a gain of 7.1 per cent in the top quartile of balanced funds to a 3 per cent gain for the bottom quartile over the 12 months to October. The result for October "shows that no one has been immune from this turmoil over the last 12 months, except those who have been nestled happily in cash," Mr Bresnahan said. Looking at the median performances, cash turned in the top performance of 5.7 per cent for the year to October. The median return on funds focused on Australian equities fared worst over the year by falling 33.2 per cent, worse even than the median return on property-based funds, which tumbled 32.8 per cent over the same period. But property funds delivered the worst result, with a fall of 54.3 per cent in the bottom quartile. The best of the property bunch posted the only double-digit gain of the year at 10.1 per cent. The losses are expected to continue because the ASX 200 has fallen 14.9 per cent since the end of October. In October, the All Ordinaries index shed 14 per cent and the ASX 200 dropped 13 per cent, its biggest loss since it was formed in 1992."It would be surprising if the level of switching did not increase as consumers became more aware of the divergence of returns between funds," Mr Bresnahan said, noting a 16 per cent difference in the returns among balanced funds.
© 2008 Sydney Morning Herald