Superannuation fund balances plunged in March as the war in Iran and the disruption to oil supplies erased returns since September and reduced them in the financial-year-to-date (FYTD), according to SuperRatings.
The superannuation research house estimated the balance of a median balanced fund in accumulation phase fell by 3.2% in March, reducing the FYTD return to 2.8%, while the median growth and the capital stable options dropped by 4.1% and 1.8% respectively, pushing down the cumulative returns to 3.0% and 2.1% respectively.
“With just one quarter remaining in the financial year, the pathway for funds to once again outperform their long-term average is narrowing, with returns confronting elevated levels of uncertainty across both global and domestic markets,” SuperRatings Director Kirby Rappell said in a media release.
“Markets are responding quickly to a rapidly evolving situation. This means we are likely in a period of greater volatility. While this will flow through to balances, it should be remembered that member’s super is usually invested across a range of asset classes (not just shares) and that over the long term, super returns remain sound.”
Pension fund members also suffered with median, growth and capital stable options dropping 3.8%, 4.6% and 2.0% in March, cutting the FYTD returns to 3.1%, 3.0% and 2.4% respectively.
Rappell said it was natural for members feeling uneasy to consider switching to cash or more defensive assets during periods of market stress.
“But switching after markets have already fallen can lock in losses and may mean missing the rebound when conditions improve, potentially leading to a poorer retirement outcome over the long term,” he said.
The results in March reflected the reality that super returns were being pulled in multiple directions with geopolitical issues, global market volatility and interest rate changes influencing them.
“While negative months are difficult, it’s important to remember super is a long-term investment and markets can recover over time,” he said.
