Super funds shed 20% but investors urged not to panic

The horror year for Australian superannuation investors has continued, with the average balanced fund shedding 3.1% in November, taking losses for the 12 months until the end of November to a staggering 19.74%.

The horror year for Australian superannuation investors has continued, with the average balanced fund shedding 3.1% in November, taking losses for the 12 months until the end of November to a staggering 19.74%.

The new data from superannuation research firm SuperRatings shows that most of the damage to super funds has been done in the last three months, when the average balanced fund lost more than 13%.

SuperRatings chief executive Jeff Bresnahan says returns are unlikely to improve before the end of the financial year at 30 June 2009, meaning investors are headed for their third negative return of the decade.

However, Bresnahan says this is not the time to panic. “If anything we are pretty close the bottom,” he says. “The worst is over – touch wood.”

Bresnahan argues that radically changing your superannuation strategy right now could have disastrous consequences, as some of the biggest gains come in the period after sharemarkets hit the bottom.

“If members haven’t changed their strategy in the last 12 months, this is not the time to be doing so.”

That said, Bresnahan hopes the poor returns seen in 2008 will jolt a few superannuation investors into action and force them to actually think about their super strategy.

“People are very quick to blame super funds for the losses but at the end of the day people have a responsibility to get involved themselves.”

He has three tips for a quick super strategy review over the holiday break:

– Look at what fees you pay. You may not be able to control your returns, but you can look hard at the fees you are paying to your super fund manager. Look hard at anything around the 2% mark – you would want to be getting top class service, returns and extras for this sort of fee.

– Look at where your money is invested. Most super funds offer a range of investment options from balanced (where money is invested in shares, cash and fixed interest) to growth (where more money is in shares) and plenty in between. Bresnahan has one tip – be careful about cash at the moment. “Cash is probably not the place to be at the bottom because of the reduced interest rates and the fact that cash options are fully taxed.”

– Look at your returns. Yes, your return this year and next year are going to look bad. But before you start throwing things, take a look at how other funds have performed – your fund might not actually be doing that badly.