Whither withering funds?

FOR 62-year-old John Hale, the obsession Australian superannuation funds have with the sharemarket means more years sitting on the hard seat of his forklift, moving pallets of dried milk.

FOR 62-year-old John Hale, the obsession Australian superannuation funds have with the sharemarket means more years sitting on the hard seat of his forklift, moving pallets of dried milk.

The forklift driver's latest statement from industry fund AustralianSuper shows his balance fell 1.37 per cent in 2011.

Mr Hale had a modest $80,000 invested in the fund's default balanced option, which shovels 60 per cent of its funds into sharemarkets both here and overseas.

Over the past five years, his investment has earnt a paltry 0.87 per cent.

"I'm 62 and I want to now work part-time. AustralianSuper was supposed to be my safety net, but I need to get it out and into the bank where I will get better returns," he said.

The $1.3 trillion superannuation sector's heavy investment in equity markets has drawn fire from a succession of senior political and finance figures.

Most recently, former finance minister Lindsay Tanner last week warned that governments might intervene if the industry did not take seriously concerns expressed by head of the Super System Review, Jeremy Cooper, the former chairman of the Future Fund, David Murray, and the former Treasury head Ken Henry.

"If governments in the future of either side are faced with extremely unhappy super funds members . . . that will generate enormous political pressure," Mr Tanner said.

Mr Hale, who lives above a pub in inner-west Seddon, close to the Port of Melbourne goods shed where he works for Murray Goulburn Co-operative, said he was in the process of moving his money out of AustralianSuper and into term deposits.

"What I can't work out, looking at those ads on TV, is that the person in an industry super fund is going up the escalator," he said. "But I've gone down the escalator. Why is that?"

AustralianSuper chief executive Ian Silk said the fund had reduced its investment in shares from 60 per cent to 55 per cent.

"In the last few years equities have performed in a pretty volatile fashion but overall the performance has been disappointing," he said.

"But the reason that most funds, including ours, have most of their assets in equities is that over the past 100 years equities have proven to be the best-performing asset class."

He said AustralianSuper remained heavily invested in shares because it was "virtually impossible" to pick the best times to get in and out of the market. "Some of the best rises are in a bear market," he said.

While the fund took a pounding in the global financial crisis, losing 5.8 per cent in the 2008 financial year and 13.3 per cent the following year, it came back strongly in the 2010 and 2011 financial years, earning 10 per cent a year.

However, the last six months of calendar 2011 reversed the trend, with the S&P/ASX 200 Index plunging 13.8 per cent and the US S&P 500 falling 4.3 per cent.