Super funds have seen a significant downturn in the last month, with the worst negative returns since the Global Financial Crisis. The ‘typical’ super fund is estimated to fall by 5% this financial year. A typical super fund is one with between 61% and 80% allocated to growth assets such as shares.
Decline in global sharemarkets during June has impacted super returns significantly. Super balances have also been impacted by a decline in the bond market. While bonds are traditionally viewed as a safer asset, they have also experienced significant downturn. This has had an impact on more conservative super funds, who are also likely to see a negative return.
While the Australian market has been relatively strong this year, it has tumbled around 10 per cent since the start of June. Industry leading advisors are warning investors, both retail fund investors and Self-Managed Super Fund (SMSF) investors, not to make any reactive decisions to the decline in the market and super balances. The current projected negative return in super balances is only the fifth time super funds will see a negative return in the 30 years since compulsory superannuation was introduced.
Australians have been warned not to panic when they see their end of year superannuation statements or reports. Super invested in a retail fund will usually be diversified so that if one asset class or market experiences a major drop, the other asset classes will hopefully make up for that loss. SMSFs should also be structured in a similar way to offer this same level of protection.
While we are seeing declines across all markets right now, it will not be forever. If you are currently considering making any changes to your super investment strategy in the new financial year, we strongly encourage you to consult with our financial planning division.