Super funds taking losses as interest rates, inflation hit markets

After strong returns in the last financial year, superannuation funds were heading into a second month of negative returns, according to Super Ratings.

Oct 12, 2023, updated Oct 12, 2023
Retirement costs climbed in the September quarter (file photo)

Retirement costs climbed in the September quarter (file photo)

The company said funds were estimated to post negative returns for the second month in a row in September, with the median balanced option return of -1.8 per cent for the month.

Super Ratings said investors were adjusting to the increased likelihood of interest rates remaining higher for longer which was impacting returns.

“Despite these challenges, the median balanced option return for the 3 months to 30 September 2023 is estimated to be a modest -0.4 per cent fall,” the company said.

“We observed an acceleration of the August performance trend in September as both international and Australian equities weighed on returns, with sticky inflation the key concern for markets” Super Ratings executive director Kirby Rappell said.

“The median growth option fell by an estimated -2.2 per cent, while lower exposure to shares resulted in the median capital stable option delivering a smaller loss of -1.1 per cent for September.”

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It said pension returns also fell in September, with the median balanced pension option falling an estimated -1.8 per cent. The median growth option was estimated to decline -2.3 per cent for the month while the more defensive median capital stable pension option is estimated to deliver a -1.2 per cent return.

“The trajectory for interest rates and geopolitical tensions are likely to remain as the dominant drivers for superannuation returns over the coming months. While returns fell over the month, relative to the broader market, funds continue to outperform equities due to the benefits of diversification.

“Super funds continue to display strong capabilities in navigating uncertain market environments and members have been experiencing increased levels of ups and downs for some time now” Rappell said.

“Our message to members remains one of focusing on the long term and sticking with their long-term investment strategy. The ups and downs are likely to continue, and members who are thinking about changing their strategy are encouraged to contact their fund, or speak with a trusted adviser, before making any changes.”

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