SUPER AND THE CORONA FINANCIAL CRISIS

Super funds have been hit by the Corona Financial Crisis but nowhere near as badly as you might think.

Key points

• The SelectingSuper index fell 10% when the Corona Financial Crisis (CFC) started on 20 February until the end of April 2020.
• Australia's share market fell 22% meaning super funds fell less than half as much.
• Over the 12-months to end-April the SelectingSuper MySuper index is down 5%. However if this is  compared to the 2008-10 Global Financial Crisis (GFC) when the index over 12 months fell as low as -21% at December 2008, the MySuper index is today is fairly reasonable shape.
• It took just two years for the Rainmaker MySuper index to fully recover from the GFC.

The Corona Financial Crisis that started on 20 February 2020 has hit super funds hard but nowhere near as hard as expected or as hard as the 2008-10 Global Financial Crisis.

The SelectingSuper MySuper index lost 3.4% in February, lost another 9.1% in March but in April bounced-back 2.2%. This was the best monthly return since June last year.

As a result, MySuper returns are tracking at -4.8% so far this financial year, ie, from July to end-April. But rolling 12-month returns are a remarkably respectable -3.2%.

By comparison, Australian shares have been on a rollercoaster ride. The ASX fell 36% between 20 Feb and 23 March before bouncing-back 22% by end-April. The net effect is the ASX is down 22% from where it was when the CFC began on 20 February.

While this may frighten some super fund members, it should also encourage them. It shows how their fund's investment strategies have insulated them from the worst of the share market falls.

Super fund members should take solace that during the GFC that happened 12 years ago the SelectingSuper MySuper fell as much as 21% in the 12-months to end December 2008. Yet within just two years the index had recovered all its lost ground.

The decade that followed was among the best 10 years ever experienced by super funds. So while super fund returns have fallen in the past few months, they've fallen from a very high place, and fallen back only to where they were in February 2019.

Sure it's a setback but it's far from being a wipe out.

These upbeat figures are explained by the ASX posting gains of 8.8% in April while international shares posted gains of 3.7%. Listed Australian property meanwhile jumped 13.7%. International bonds went up 1.3%, however, Australian bonds went down slightly by 0.3%.

Growth, balanced, capital stable

In times like these we should remember that while super fund members with exposure to higher growth assets usually do better over the long-run, when markets fall they might do worse. In the 12-months to end March 2020 the Rainmaker Growth index returned -6.1% compared to -3.4% for Balanced and -1.2% for Capital Stable.

Too see how your super fund is performing during the CFC, click here