Hang On For The Ride

The past year has seen further growth in account balances.

Q WHAT CAN AUSSIES EXPECT FROM THEIR SUPER FUNDS NEXT YEAR IN TERMS OF VOLATILITY AND RETURNS?

We have talked about the “lower for longer” outlook for investment returns in recent years and we continue to await its arrival. Nonetheless, we continue to believe the year ahead will see a softening in returns, as well as rising levels of volatility, representing a more challenging investment environment.

The median balanced fund – those with a long-term allocation of 60%-76% to growth assets – achieved a return of 10.7% over the 12 months to August 31, 2018. Strong Australian and international share performance over the year has been the main driver of returns, with both Australian and international shares having a strong finish to the year. However, we saw increasing volatility in September and October, with super funds expecting this to continue for the rest of 2018. Alternatives, encompassing infrastructure, private equity and alternative credit, have also driven strong outcomes, while property has performed reasonably but is expected to be more muted.

Since the depths of the GFC, super funds have now recorded their ninth year of positive returns for the median balanced option. In the year ahead, key areas of focus will be economic factors both locally and overseas, geopolitical risks and the impact of any structural and regulatory changes based on the royal commission into financial services.