AUSTRALIANS anticipating a decent return from their super fund have had their hopes dashed by political turmoil in Europe this month.
Industry researchers say it has become increasingly likely that balanced funds will make a loss for 2011-12, with nearly all the gains made on the Australian sharemarket this financial year melting away in the past three weeks.
Research by SuperRatings shows median balanced funds the most popular kind of fund in Australia have lost an estimated 3.2 per cent since May 1, as political turmoil in Europe, particularly in Greece and Spain, causes investors to dump global and local equities for more defensive assets, such as bonds.
The global flight to safety has wiped more than 7 per cent from the value of Australian shares. The report said Australian stocks which account for 31 per cent of the average balanced fund were the "largest detractor" for super funds during the month.
"Right now it looks like the best Australians could expect from their balanced option in 2011-12 would be a return close to inflation, whilst the worst would be a loss of up to 5 per cent," said SuperRatings chairman Jeff Bresnahan.
"Clearly we are in the hands of markets' reactions to the ongoing European challenges over the next six weeks."
SuperRatings data shows the return for the median balanced fund in April was just 0.3 per cent.
For the three months to the end of April, the return for the median balanced fund was 3.62 per cent, and for the year from July 1 last year to April 30 it was 2.41 per cent.
Rival super research agency Chant West estimates returns for the financial year to date for balanced funds are -0.5 per cent.
"What this means is that the likelihood of a third consecutive positive financial year return is now in serious jeopardy, with a lot hanging on the outcome when Greece goes back to the polls in June," said Chant West director Warren Chant.
Mr Chant said industry funds and master trusts performed similarly in April, returning 0.4 per cent and 0.3 per cent respectively, but industry funds would continue to hold the lead over the longer term.
"Industry funds have done better when listed markets have been flat or in decline, while more positive markets have favoured master trusts," he said. "That pattern is likely to continue as long as the asset-allocation differences between the two camps are so pronounced."
Over 10 years to the end of April, industry funds outperformed master trusts by 1.4 per cent a year, returning an annualised 6.1 per cent against 4.7 per cent.