Superannuation returns for May went into negative territory despite the standout strength in the Australian share market, new figures from SuperRatings show.

The typical balanced option return was -0.7 per cent in May. The dip was caused by funds’ international share exposures which were dragged down by worries caused by the re-emergence of the US-China trade conflict and uncertainty surrounding central bank policy.

But for the year to May 31, balanced funds in accumulation mode returned a healthy 5.1 per cent, while those in pension mode did even better, scoring a 5.8 per cent rise for members.

The rolling 12 month return to May 31 was a slightly weaker 4.8 per cent while for pensions it was far stronger at 7.3 per cent. Funds in pension mode have lower exposures to growth assets and have benefited from weak interest rates which pushed up the value of fixed interest style investments.

The negative international news pushed the international share option down 4 per cent for May. But Australian shares held firm, rising 1.4 per cent for May, giving some resilience to a weak month.

Overall, while returns for the year to May were positive, they were below the average for all previous time periods back to 20 years.

“It’s been a disappointing end to the financial year for super, but long-term performance remains robust,” said SuperRatings Executive Director Kirby Rappell.

“The median balanced option return over the past 10 years is around 8.5 per cent, indicating that super has delivered solid returns even in a low interest-rate environment.”

Downside risks to the Australian economy, including weak inflation, falling home prices, and tighter credit conditions, are taking their toll on consumer confidence, while the geopolitical risks in the form of US-China trade negotiations have also contributed to market volatility, he said.

However, the Australian market has held up reasonably well over the financial year to date, with the S&P/ASX 200 Index returning 7.6 per cent so far to the end of May, outperforming global share performance of 6.3 per cent measured by the MSCI World Ex-Australia Index.

Listed property has been the leading asset class so far this financial year, with the S&P/ASX 200 A-REIT Index returning 14.5 per cent. Both property and shares saw a modest boost in May with the negative gearing debate now effectively put to bed following the federal election, the SuperRatings report said.