Australia’s super funds have continued their recovery in April, according to monthly estimates from superannuation research house SuperRatings.
SuperRatings estimates the median balanced superannuation option generated a return of 1.2 per cent for the month, mainly driven by continuing momentum in Australian and international equities markets.
However, inflation is still at much higher levels than the Reserve Bank of Australia (RBA) would like, which caused the RBA to lift interest rates once again this month.
With the end of the financial year approaching, most funds look to be on track to deliver a positive return for the year, with the median balanced on track to return around 8.1 per cent.
The median growth option rose by an estimated 1.4 per cent in April, while the median capital stable option rose by an estimated 0.7 per cent.
Kirby Rappell, executive director at SuperRatings, welcomed the improvement and said super funds are ending the year well after a somewhat rocky start.
“The strong financial year to date return will be welcome news for members after last year’s losses as well as some bumpy months at the start of this financial year,” he says.
But he also stressed the impact inflation is having on superannuation returns.
“However, these returns and latest inflation figures demonstrate the challenge facing super funds, the economy and everyday Australians,” Mr Rappell says.
“Inflation for the year to March sat at 7 per cent. Most funds over the longer term are targeting a return of inflation plus 3 per cent per annum for their members invested in the balanced option.
“Put simply, super funds are on track to return around 8 per cent thus far this financial year, despite this also being behind an objective of inflation plus 3 per cent.”
Mr Rappell says this reinforces the idea that superannuation remains a long-term investment and that volatility in the short term shouldn’t cause investors to panic.
“Returns are holding up pretty well, despite the challenges that funds and their members are facing to adapt to a higher inflation environment,” he says.
“We expect to see continuing volatility in returns, despite the strength with which volatility has been navigated to date. Setting long-term strategy remains the best approach to long-term success.
“While fund performance may struggle to significantly outpace inflation in the current environment, over the long term they continue to perform well.”
How did your superannuation perform in April? Are you on track to end the financial year in positive territory? Let us know in the comments section below.
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