The worst superannuation fund returns in 16 years
'NOT SO SUPER' The Courier-Mail 29/7/08

TUMBLING share prices have caused the worst super fund investment losses in 16 years as funds dropped, on average, 6.4% in a year.

The global credit crisis has sent sharemarkets into a spin since November and slashed super fund returns.

Figures from research group SuperRatings yesterday revealed $60 billion in value lost for balanced-option super funds for the year ended June 30. Balanced-option funds form about 90% of Australian super fund investments.

The 6:4% drop contrasts with the gain of 15.7% reaped in the previous financial year.

SuperRatings managing director Jeff Bresnahan said the super funds it monitors posted their worst negative return, on average, since compulsory super was introduced in July 1992.

The best performing super fund was Vision Super Savers, which had a 2007-08 return of negative 1.7%, while Legg Mason Corporate Master Trust was the worst performer with a slide of 15.87%.

The average drop for the year of 6.4% would mean a worker on an annual salary of $70,000, with a 9% employer contribution of $6300, would have had $16,403 wiped off a total super investment of $256,300 in the year to June 30. If the investment was with Legg Mason Corporate Master Trust, $40,675 in value would have been lost.

SuperRatings data also showed the median gap between industry super funds and retail funds grew to a 4% difference for the 12 months to June 30.

Retail funds' balanced option returns were an average minus 9.84%, while industry funds had an average return of minus 5.78%. Industry Super Network put this partly down to higher average fees charged by retail funds.

Mr Bresnahan said the rout on Australian and international equity markets in June flowed straight through to Australia's major super funds.

"It was the worst possible finish to an already poor year," he said. "Worse still is that a number of balanced options posted negative returns well into double digits."

Exposure to shares and to listed property trusts dragged down balanced funds.

However, superannuation experts also point to robust super fund returns, when averaged over three and five years, of 7.4% and 9.6% a year.

For the year ahead, balanced option returns would appear modest at best given a grim outlook for the US and Australian sharemarkets.

The All Ordinaries index is down almost 6.5% to 4989.9 points since July 1 and took another pounding yesterday. ANZ shares fell almost 11% after the bank revealed its provisions for bad debt had reached $1.2 billion.

CommSec analyst Craig James says CommSec's forecast for the All Ords to reach 5800 points by December is looking vulnerable.

Financial adviser Scott Pape said young super fund investors, those in their 20s and 30s, "would be mad" to leave super fund allocations in a balanced fund and should be in a high-growth option.

"If your super horizon is 30 years then you take a long view of your investments," the Courier-Mail columnist said. "So as the sharemarket drops, your fixed amount of money is going to buy more. If you're more mature, you might want to stay in a balanced option because it gives you a good diversified asset base."