Home / Superannuation / Super returns suffer in September as higher-for-longer sinks in

Superannuation funds and pensions posted declining returns in September, weighed down by falls in sharemarkets and an uncertain rates outlook, according to a new report. But they continued to outperform equities, showing diversification pays off.

Superannuation funds are on track for another month of negative returns, according to SuperRatings, which expects the median balanced option to return -1.8 per cent for September in a sign investors are adjusting to a likely higher-for-longer interest rate scenario.

Over the three-month period through September 30, however, the research firm estimates the median balanced option recorded a more modest fall of -0.4 per cent, despite the ongoing economic challenges and sharp equity market declines.

Meanwhile, the median growth option returned an estimated -2.2 per cent for the month of September, and the median capital stable option delivered a loss of -1.1 per cent (see chart).

“We observed an acceleration of the August performance trend in September as both international and Australian equities weighed on returns, with sticky inflation the key concern for markets,” SuperRatings executive director Kirby Rappell said.

September also saw a fall in pension returns. SuperRatings estimates the median balanced pension option fell 1.8 per cent over the month and the median growth option declined 2.3 per cent. The median capital stable pension option, which is more defensive, is estimate to return -1.2 per cent (see chart).

Superannuation returns are likely to continue being driven by geopolitical tensions and the interest-rate trajectory for the next several months, the report stated, pointing out that, despite the declining returns in September, super funds continue to outperform equities. That’s largely thanks to the benefits of diversification, Rappell said.

“Super funds continue to display strong capabilities in navigating uncertain market environments, and members have been experiencing increased levels of ups and downs for some time now,” he said.

“Our message to members remains one of focussing on the long term and sticking with their long-term investment strategy. The ups and downs are likely to continue, and members who are thinking about changing their strategy are encouraged to contact their fund or speak with a trusted adviser before making changes.”