Australian superannuation funds heading for first loss in five years as trade wars rattle global markets

Members of Australian superannuation funds are facing their first annual losses since 2011 as fears of a trans-Pacific trade war rock global investor confidence.

After a total loss of more than 3.5 per cent in October and November, investors in growth-seeking super funds potentially face another 2 per cent-plus loss in December from big falls in international sharemarkets.

Figures released today by super ratings group Chant West showed funds invested solely in growth-seeking assets such as shares and property trusts fell one per cent in November, while funds with 61 per cent to 80 per cent growth assets fell 0.6 per cent that month.

For the 11 months to the end of November, all-growth funds made a gain of 0.2 per cent, high growth funds with 81 per cent to 95 per cent were 1.5 per cent in the black and growth funds were 1.8 per cent in the black.

Aggressively set funds are highly likely to end the year in the red, while it is going to be a close call for everyone but those of us in conservatively set funds with less than 40 per cent growth assets.

Chant West senior investment research manager Mano Mohankumar said growth funds still had a chance of finishing 2018 in the black.

“However, it’s no sure thing and we may yet see the first negative year since 2011,” he said.

“Whatever happens, this year’s return will be nowhere near the 10 per cent average of the previous six years.

“This flat result doesn’t come as a surprise given the stellar run super funds have experienced since early 2009.”

The final results for 2018 will depend not only on market performance over the next fortnight, but also on the valuation techniques and asset mixes of individual superannuation funds.

Industry super funds often have a high proportion of assets that are not listed on financial markets, making them less vulnerable to market fluctuations but arguably also depriving members of accurate readings of their fund’s true value.

With talk of a trade war between China and the US, volatility has continued on global sharemarkets this month and driven the MSCI World Index down by 6.7 per cent between November 30 and Monday night.

Australian shares have fallen around one per cent since November 30.

For someone with 30 per cent of their wealth in overseas shares and 30 per cent in Australian shares, that could easily translate into a 2 per cent loss so far for this month — and far more for an aggressively set fund.

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