Nest-egg nerves: the challenge facing super funds


As each year of consecutive super fund growth passes, jitters about a downturn mount. The consensus is that super returns will take a tumble, and possibly soon.

"It would be a mistake to assume that the level of returns over the past decade will continue," says Mano Mohankumar, senior investment manager at research and ratings house Chant West.

Calendar year 2019 was exceptionally good. The median growth fund returned 14.7 per cent, says Chant West, with UniSuper topping the table at 18.4 per cent.$zoom_0.662%2C$multiply_0.8687%2C$ratio_1.776846%2C$width_1059%2C$x_0%2C$y_0/t_crop_custom/e_sharpen:25%2Cq_42%2Cf_auto/5b4c919aadd6a43a51d3bd4981012552ace2321b
Super fund members should take comfort that their superannuation is invested in well-diversified portfolios, says Mano Mohankumar. Simon Letch

Even the worst performers in the growth category (funds with 61-80 per cent exposure to growth assets) produced double-digit results.

"At some stage they're going to revert to more 'normal' levels, and there will be more challenging times ahead," says Mohankumar.

Compared with pension funds globally, Australian super funds have high exposure to equities – the average allocation to shares among growth funds is 53 per cent.

This is why they have done so well in the bull market of the past decade. In 2019, both domestic and international equities rallied strongly and super funds experienced their best calendar-year return since 2013.

So we know super funds generally perform well when markets are going up. But are they prepared for a downturn?