Superannuation returns have started the calendar year in positive territory.
After a horror 2022, returns bounced back in the first month of 2023, with data from research group SuperRatings estimating a 3 per cent return in January for the median balanced option.
Kirby Rappell, executive director of SuperRatings, says the positive result is an endorsement of the way Australia’s funds have managed the uncertain economic climate.
“Funds have had a positive start to 2023 and it again underlines the way in which funds have navigated an uncertain market well overall,” he says.
“However, inflation remains high and the Reserve Bank’s commitment to controlling inflation means member balances are likely to see more ups and downs over the coming months.”
Read: Analysts optimistic about super returns in 2023
While there are signals that inflation may be cooling, it’s still on an upwards trajectory, with the RBA forecasting it will reach 4.25 per cent by the end of 2023.
SuperRatings says the positive January result has pushed estimates for the 2022–23 financial year to 6 per cent, with five months still to go.
SuperRatings estimated that the median growth option in January increased by 3.4 per cent, while the median capital stable option generated a return of 1.8 per cent.
Alex Joiner, chief economist at IFM Investors, told the Australian Financial Review the poor results of 2022 were driven by the defensive stance taken by many funds, but that they had many reasons to believe 2023 would be better.
“A lot of superannuation funds became very defensive and pushed their allocation toward fixed income products, particularly government bonds and cash,” he said.
Read: New report suggests super withdrawal rate increase in 2023
“They’re looking for central bank pivots, inflation to come down and the worst of the economic downturn to be behind us, and a lot of people think that’s going to be by mid-year.”
To some this may seem optimistic, but there are international signs the downturn is easing – China is emerging from two years of harsh lockdown conditions and the European winter turned out to be milder than expected leading to fewer COVID cases.
And in the US, there are signs that inflation may have already begun to cool, which would ease pressure on Australian markets.
Read: Australians are getting older. Is your super fund ready?
Mano Mohankumar, senior investment research manager at Chant West, says 2022’s returns were an aberration and only the fifth negative year since super’s introduction 30 years ago.
He says super members’ best option is to stay where they are and not try to chase returns or “time the market”.
“We caution members about the perils of attempting to time the market,” he says.
“Far more often than not, it results in a worse outcome in the long run than if you stay the course. Panicking only converts paper losses into real ones.
“Most members can afford to remain patient and, if you’re thinking about withdrawing money or switching to a less risky option, we strongly encourage you to seek financial advice before doing so.”
How did your super fund perform in January? Are you happy with your fund? Let us know in the comments section below.
