Super almost breaks even in FY 2020

Published on
Superannuation MySuper performance COVID and FY 19-20

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 that has just returned -8%, Australia is falling into recession and unemployment is on the rise.

"The expected average return for 2019-20 is the fourth lowest in 20 years," said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

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

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

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

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

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

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

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

Growth, balanced, capital stable

Super fund members with higher exposures to growth assets suffered heavier impacts due to the CFC compared with those in conservative options. This is shown by the Rainmaker Growth Index for the 12 months to end May 2020 that returned -0.3%, compared to 0.7% for balanced and 1.1% for capital stable.

"While growth portfolios can be hit harder than conservative portfolios in savage capital market corrections, they can recover faster."

Over three years the growth index is still ahead of the conservative 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 MySuper product . The highest product returned 3.7% over 12 months, while the lowest returned -4.8%.

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

Single strategy versus lifecycle

Lifecycle MySuper products (those that invest depending on each members age) continue to underperform regular single strategy MySuper products. This is because lifecycle products used by young people hold very high allocations to Australian shares.

Segment differences

The not for profit (NFP) MySuper segment continued its trend of outperformance over the retail MySuper segment. The margin over the 12 months to May 2020 was 1.4%.

ESG

While the Rainmaker ESG Diversified Index returned 1.8% over the 12 months to May 2020, outperforming the MySuper index by a wide margin, the COVID-19 ESG-effect has recently tempered.

The Rainmaker ESG Diversified Index that combines balanced and growth workplace ESG options outperformed the overall equivalent index by 1.6% over the 12 month period.

But the Rainmaker ESG Equities Index that combines domestic and global equities workplace ESG options underperformed the overall equivalent index by 0.5 percentage points over the 12 month period.

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

"These funds make up a disproportionately high share of Australia's leading super funds right now," said Dunnin.


MySuper performance to 30 June 2020

Highest performing products in selected major 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

Link to something 7GiQdTlV