Super almost breaks even in FY 2020

Published on
July 21, 2020
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Super almost breaks even in FY 2020

MySuper performance looks set to deliver -0.7% p.a. over one year and 5.0% p.a. over three-years for 2019-20 financial year, according to the Rainmaker MySuper index.

This is a remarkable result considering the share market thathas just returned -8%, Australia is falling into recession andunemployment is on the rise.

"The expected average return for 2019-20 is the fourthlowest in 20 years," said Alex Dunnin, executive director ofresearch and compliance at RainmakerInformation.

It is the first negative benchmark return since the 2008-09Global Financial Crisis when the annual financial year index returnfell to -13%. By December that year it fell even further: to-21%.

But for the three-year index the 2019-20 return is the lowestsince 2010-11.

"Despite this latest negative MySuper return, the indexis only back to where it was just 12 months ago."

It has been a wild ride for members of default MySuper productsduring the financial year. The index rose 6% between July 2019 andJanuary 2020, fell 13% during February and March before climbingback 7% between April and June.

The surprising outcome is explained by international sharesrising 5.8% in AUD terms during the financial year, Australian bondindices rising 4.3%, international bond indices rising 5.2% andcash rising about 1%.

Unlisted property fell an estimated 1.5%, global listedinfrastructure fell 3.7% and listed property fell 21%.

"These upbeat results reinforce views that the 2020Corona Financial Crisis (CFC) is different to the Global FinancialCrisis (GFC) and reminds us how disconnected the real economy isfrom the financial markets into which many superannuation fundsinvest," said Dunnin.

Growth, balanced, capital stable

Super fund members with higher exposures to growth assetssuffered heavier impacts due to the CFC compared with those inconservative options. This is shown by the Rainmaker Growth Indexfor the 12 months to end May 2020 that returned -0.3%, compared to0.7% for balanced and 1.1% for capital stable.

"While growth portfolios can be hit harder thanconservative portfolios in savage capital market corrections, theycan recover faster."

Over three years the growth index is still ahead of theconservative capital stable index, 4.5% p.a. compared with 3.3%p.a.

Highest to lowest

There is a broad range of returns delivered by different MySuperproduct . The highest product returned 3.7% over 12 months, whilethe lowest returned -4.8%.

Three-quarters of MySuper and default products returned apositive result in the 12 month period.

Single strategy versus lifecycle

Lifecycle MySuper products (those that invest depending on eachmembers age) continue to underperform regular single strategyMySuper products. This is because lifecycle products used by youngpeople hold very high allocations to Australian shares.

Segment differences

The not for profit (NFP) MySuper segment continued its trend ofoutperformance over the retail MySuper segment. The margin over the12 months to May 2020 was 1.4%.

ESG

While the Rainmaker ESG Diversified Index returned 1.8% over the12 months to May 2020, outperforming the MySuper index by a widemargin, the COVID-19 ESG-effect has recently tempered.

The Rainmaker ESG Diversified Index that combines balanced andgrowth workplace ESG options outperformed the overall equivalentindex by 1.6% over the 12 month period.

But the Rainmaker ESG Equities Index that combines domestic andglobal equities workplace ESG options underperformed the overallequivalent index by 0.5 percentage points over the 12 monthperiod.

"Funds that follow environmental, social or governanceinvestment principles have shown themselves to be very resilient tothe financial impacts of COVID-19."

"These funds make up a disproportionately high share ofAustralia's leading super funds right now," saidDunnin.

MySuper performance to 30 June 2020

Highest performing products in selectedmajor sectors, 12 months, 31 May 2020

Workplace (MySuper/default) - single strategy

 

1

FES Super - Smoothed Option (Hybrid)

3.7%

2

Australian Ethical Super Employer - Balanced (accumulation)

3.5%

3

BUSS(Q) MySuper - Balanced Growth

3.5%

4

UniSuper - Balanced

3.4%

5

State Super (NSW) SASS - Growth

2.8%

 

Average single strategy

0.9%

     

Workplace (MySuper/default) - lifecycle *

 

1

TASPLAN

3.4%

2

First State Super - Employer Sponsored

2.1%

3

Virgin Money Super Employer Division

1.6%

4

Catholic Super

1.5%

5

LGS Accumulation Scheme

1.2%

 

Average Lifestage

0.0%

 

* Lifecycle options for 40 year old members

 
     

Personal (balanced) #

 

1

UniSuper Personal Accounts - Sustainable Balanced

8.1%

2

Future Super - Balanced Index

7.0%

3

MLC MasterKey Super Fundamentals - BlackRock Global Allocation Fund

5.6%

4

ING DIRECT Living Super - Growth

5.4%

5

Suncorp Brighter Super personal - Suncorp Multi-Manager Growth Fund

5.4%

 

Average

0.7%

     

Retirement (balanced) #

 

1

UniSuper Pension - Sustainable Balanced

9.1%

2

MLC MasterKey Pension Fundamentals - BlackRock Global Allocation Fund

6.1%

3

Suncorp Brighter Super pension - Suncorp Multi-Manager Growth Fund

6.1%

4

HESTA Income Stream - Eco

5.3%

5

Australian Catholic Super RetireChoice - Socially Responsible

4.6%

 

Average

0.9%

     

# If a fund offers multiple options in these sectors only the highest performing option is shown

 

Source: Rainmaker Information

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