Super fund surge continues

The remarkable turnaround for Australian super fund investors continued in December 2009, with new data from SuperRatings showing the average balanced super fund returned 2.1% in the month, taking the total return for calendar 2009 to 12.9%.

It’s an impressive recovery given super funds received a record battering in 2008, when the median balanced fund option dropped 19.7%.

SuperRatings chief Jeff Bresnahan says the 12% rally in the second half of calendar 2009 was the biggest six-month surge since compulsory superannuation was introduced in 1992.

“So, where did all of the appreciation come from in 2009? In short, almost entirely from the Australian sharemarket,” he says.

“Based on a 32% exposure to Australian shares within a balanced option, and a 33% return from the All Ordinaries during 2009, Australian shares look to have added some 10.3% after the provision for tax.”

SuperRatings has also released data tracking the performance of the average super fund over the decade from January 2000 to December 2009.

The data highlights a period of volatility for fund members: $100,000 invested at the start of the period shot up to $159,400 by mid-2006, jumped to a peak of $187,000 in November 2007 and then suddenly dropped to $140,200 in February 2009. By the end of the decade, the $100,000 was worth $168,400.

While the volatility would dismay some investors, Bresnahan says fund members must take a long-term view of the super fund.

“When long-term results are analysed it is still clear that a diversified portfolio such as balanced or growth options will outperform the traditionally, more conservative assets such as cash and fixed interest.”

“It is simply a trade off between long-term returns and short-term volatility. Appreciation of over 68% in a balanced option for the decade clearly shows that benefits will accrue to those who are prepared to invest with a long-term objective.”