Super Industry Braces After Downturn
The Age
Tuesday February 26, 2008
AUSTRALIANS lost about 5% of their superannuation money last month and super funds are bracing for the calls as people demand an explanation.
According to SuperRatings monthly reports, the most conservatively invested "balanced" fund lost 3.25% and the worst fund plunged almost 7.5% during January, while the market fell almost 11%.But SuperRatings managing director Jeff Bresnahan said it was "quite refreshing to be reminded that super fund investments come with risk and can result in negative earnings"."The way balanced options are constructed means that, on average, members can expect a negative result every six years," he said.However, Mr Bresnahan said if the overall return for 2007-08 was negative, super funds would be under pressure to explain their performance to clients. "The challenge for funds is how they go about communicating this year's returns to members given the abnormally high returns over the past four years," he said.Over the past five years, "balanced" superannuation funds have offered an average return of 72%. In the past year, the best two performers have been funds that lean heavily towards alternative investments such as unlisted property and infrastructure.MTAA Super's balanced fund, for example, has returned 8% over the year to January 31. The median fund achieved a 2.2% return over the same period, while the Westscheme Trustee's Selection fund offered a 6.2% return.AustralianSuper deputy chief executive and chief investment officer Mark Delaney said the fund had moved from 1% cash to 5.5% cash in the past few months.The fund, which manages $30 billion with about $3 billion added per year, makes quarterly changes to asset allocation.Over the past year, its AustralianSuper - Balanced Option fund has achieved a 4.1% return.
© 2008 The Age