Super result a drooper as gains eroded

The average balanced super fund is down 0.7 per cent this year, according to research company SuperRatings, and unless there is a sharp and unexpected turnaround in equity markets, most members will receive no returns in 2011.

It has been a wild ride for superannuation investors over the past four years, with the average balanced fund tumbling in value by 19.7 per cent in 2008, jumping 12.9 per cent in 2009, and rising 4.6 per cent last year.

"We've really only had two negative years," the chairman of SuperRatings, Jeff Bresnahan, said. "If you look at returns from the last 10 years, super funds are still showing returns of about 6 per cent a year, which is in line with what funds' long-term objective is, about inflation plus 3 per cent."

Superannuation in Australia is a $1.3 trillion industry and a politically sensitive one, with the federal government proposing to increase the super contribution from 9 to 12 per cent of a worker's wage.

A balanced super fund is a portfolio of holdings in cash, fixed income, local and international shares (equities), and property.

When markets turn down, a heavy weighting towards shares can give super funds the worst returns.

According to figures from research company Chant West, the returns for funds with a share of equities of 61 to 80 per cent are down 2 per cent so far this year.

Chant West investment research manager Mano Mohankumar said as long as investors reacted sharply to bad news, Australian funds were in danger of losing more value.