THE latest superannuation fund performance data from SuperRatings does not make for pretty reading. But while the loss of about 2 per cent in 2011 may not be a cause for celebration, the result could have been worse, given the barrage of terrible economic news, the investment research manager at SuperRatings, Salvador Saiz, said.
The median-performing balanced investment option, where most people have their super, lost 1.9 per cent in 2011, the main contributor being poorly performing Australian shares, Mr Saiz said.
The typical balanced fund has an exposure to Australian shares of about 30 per cent, the single biggest exposure to any asset class. In 2011, the sharemarket, as measured by the S&P/ASX 300 accumulation index, which includes dividends, lost 11 per cent.
"Lower returns from super are the new normal and it is a fact of life that fund members are going to have to get used to," Mr Saiz said.
Conservative investment options did better than balanced options. Capital stable options, which have between 20 per cent and 40 per cent in growth assets such as shares and property and the rest in income-producing assets like fixed interest and cash, returned 3 per cent.
Capital stable options benefited from a significant exposure to bonds, which was the best-performing asset class last year, especially high-quality government bonds.
Of the balanced options, LGsuper's accumulation conservative balanced option was the best-performer for the year to December 31, returning 3.28 per cent. The same investment option was also the second-best performer over five years, with an average annual return of 2.9 per cent.
"We look to diversify the portfolio as best we can and spend a lot of time with Tower Watson [the fund's asset consultant] to get the best return for a given risk," LGSuper's chief executive, David Todd, said.
The conservative balanced option has about 15 per cent in Australian equities and about the same percentage in global equities, lower than most funds. About 15 per cent is in property. The investment option has almost 40 per cent in diversified fixed interest and the remainder in "alternatives", mostly hedge funds and infrastructure.
CareSuper's balanced option is a top-five performer over one and five years, with a five-year annual average return of 1.74 per cent. Its chief executive, Julie Lander, said the fund tried to "smooth the ride" with its asset allocation strategies.
The past five years included the worst of the global financial crisis and the fund had lessened its exposure to equities while increasing its exposure to unlisted property and infrastructure investments.
"Last year we further reduced our exposure to Australian equities," Ms Lander said, and that had bolstered the one-year performance.
REST Industry Super's core strategy option was the third-best performer over five years, with an average return of 2.2 per cent.
"One of the key ways to make money is not to lose as much when markets are bad," said the chief executive of the two-million-member fund, Damian Hill. Limiting losses was more important than "just trying [to] blow the lights out when things are going well", he said.
The option's exposure to equities, Australian and global, at about 55 per cent, has been fairly stable. Mr Hill said a big contributor to the relatively good performance over the five years was the option's exposure to "credit opportunities", such as corporate bonds and collateralised loan obligations. The fund first invested in credit securities in late 2008.