Wow, what a difference a year makes! From a loss of 20% to a gain approaching 13% in twelve months is the most remarkable comeback since Lance Armstrong. Or Michael Schumacher. Or Tiger Woods ... oh hold on, Tiger hasn’t come back yet.
We like to think we at Savvy have our fingers on the super pulse, but even we have to admit that we didn’t see 2009 coming. At the end of 2008 we, like most of you, were wallowing in shock at having lost, on average, nearly 20% in the year just ended. Australia might have avoided a recession, but many Australians had slumped into a super-induced state of depression. For those of us of a certain age, worrying if we’d have to defer retirement as a result of 2007/8 losses, this performance is news to have us jumping for joy - or at the very least getting up from our Jason recliners.
Just how good has 2009 been? Here are the medians of the SuperRatings SR50 Balanced (60-76) Index as at 31 December 2009:
| The month of December 2009: | 2.19% |
|---|---|
| 3 months to 31 December 2009: | 2.39% |
| Financial year to 31 December 2009: | 12.11% |
| 12 months to 31 December 2009: | 12.88% |
| Rolling 3 year return to 31 December 2009: | -1.10% pa |
| Rolling 5 year return to 31 December 2009: | 4.83% pa |
| Rolling 7 year return to 31 December 2009: | 6.80% pa |
| Rolling 10 year return to 31 December 2009: | 5.51% pa |
Median Option refers to "balanced" option with exposure to growth style assets of between 60% and 76%. Approximately 80% of Australians in our major super funds are invested in their fund's default investment option which in most cases is the balanced investment option. Returns are net of fees and tax.
What’s the secret to the turnaround? In a word, shares. The local market has been powering ahead, carrying share-heavy investments with it.
That's the good news, now for the bad
Despite the good news for 2009, some of you have missed out on these gains. Obviously if your super isn't invested (at least partially) in Australian shares, you won't have seen anything like these returns. Much of the world isn't bouncing back from the GFC as quickly as Australia, and so foreign share prices aren't recovering with the speed of the ASX.
Some previously star performers are dragging their feet, sometimes because a lot of their (which is really your) money is in unlisted investments (like infrastructure or property) rather than shares.
As usual, there's still a big gap between the best and worst performers, as this SuperRatings graph reveals.
| Option Type | Highest | Top Quartile | Median | Bottom Quartile | Lowest |
|---|---|---|---|---|---|
| Balanced (60%-76% Growth) | 20.2% | 15.4% | 12.9% | 11.0% | -8.6% |
| Growth (77%-90% Growth) | 23.8% | 18.4% | 16.5% | 13.9% | 8.1% |
| Australian Shares | 46.8% | 38.0% | 35.8% | 31.8% | 18.8% |
| International Shares | 23.0% | 13.9% | 7.8% | 1.3% | -4.4% |
| Capital Stable | 15.1% | 10.1% | 8.9% | 7.5% | -7.5% |
| Property | 16.3% | 10.4% | 1.8% | -8.3% | -14.9% |
| Cash | 6.1% | 3.4% | 2.9% | 2.5% | 1.1% |
Finally, the GFC scared a lot of us out of contributing to our super. SuperRatings research shows that personal or discretionary contributions fell by over 35% in 2008/09. This was on top of a 32% drop in contributions in 2007/08. This isn’t all that surprising. In the last 2 years, many Australians lost confidence in super. It’s a pity because the extra money we might have invested would now be benefitting from this rampant growth.
What lies ahead in 2010?
The worst falls on record are behind us. If we were betting people, we’d put a small wager on 2010 continuing the trend set in 2009 - maybe not as remarkable, but very health all the same. The gap between best and worst funds reinforces the need to not just be in the right option, but the right fund.
The best way to find the right fund is with our help. Use our calculators, check out our top-rated funds and read the indepth Fundamentals report on your shortlisted products.
Getting your super in shape now will put you in better shape in the future. You’ll earn more and you’ll spend less.
Disclaimer: SuperRatings Pty Limited holds Australian Financial Services Licence No. 311880. This release has been prepared for the purpose of providing general advice only and has not considered the recipients objectives, financial situation or needs. The recipient should consider obtaining independent advice before making any decision about a financial product referred to in this report and should obtain and consider a copy of the relevant Product Disclosure Statement from the product issuer.