Finance Your Super APRA reveals top-performing super funds over seven years

APRA reveals top-performing super funds over seven years

super funds
APRA has revealed Australia's top-performing super funds over the past seven years. Photo: Getty
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The latest heat maps provided by APRA show the difference between the performance of default MySuper products and tailor-made choice products for the first time – and it’s big.

Top-performing choice funds delivered returns nearly 20 per cent higher than the best-performing MySuper products over the seven years to June 30, 2021.

UniSuper’s high growth option was the top choice fund in APRA’s review and returned 12.01 per cent a year over seven years.

The best-performing MySuper product, Goldman Sachs JB Were’s employee fund, returned 10.07 per cent a year, 19.3 per cent less than the top choice fund.

That is a big difference in terms of money in your account.

A super balance of $50,000 earning 12.01 per cent annually, without further contributions, would have turned into $110,603.

The same fund earning 10.07 per cent a year would have turned into $97,871 over that time.

Interestingly, returns over three years for balanced funds that have 60 to 76 per cent growth assets in their makeup show similar returns to MySuper products over seven years.

Not all balanced funds are MySuper products, but their asset makeup is similar.

The top three-year performers had less time in the market before experiencing the dramatic 34 per cent collapse last March during the COVID crisis.

But nonetheless they recovered as well as the leading funds over seven years.

  • Click here to see the full rankings from APRA

The question facing super fund members is whether they should leave their money in a balanced or MySuper option or chase higher returns in the Choice sector.

Most people in default funds have not chosen to be there but rather were put there by their employer when they started a job.

The situation will change slightly now, after the federal government passed legislation this year stapling members for life to the first fund they joined unless they choose to do something else.

So it is perhaps more important than ever for super fund members to make sure their money is invested in the best account possible.

Choosing a super fund

Rob Goudie, principal of Consortium Private Wealth, said just because a fund is a default option or has a ‘balanced’ label doesn’t mean you can make assumptions about its makeup.

“I’ve seen balanced funds that can be 50 per cent, even as high as 85 per cent, growth,” Mr Goudie said.

So the first thing you need to do if you are in a balanced fund is check the makeup of its investments on the the fund’s website.

A true balanced fund should invest 60 to 80 per cent of your money into growth assets.

If they are investing less than that, then you are in conservative fund that is more appropriate for someone with a shorter investment time frame.

Chant West director Ian Fryer said conservative options have underperformed in recent years.

Managers of conservative options “feared interest rates would go up so they chose to hold short-duration bonds which would not lose as much in value as longer duration [bonds] if rates rose,” Mr Fryer said.

But the opposite happened during the pandemic, with interest rates being slashed to record lows, so those conservative funds did worse than they normally would have done when compared to balanced funds.

High risk, high reward

If you are in a fund with more than 80 per cent growth, you are actually in a high-growth option, which typically holds between 81 and 95 per cent in growth assets.

These funds have the potential to deliver much higher returns but come with added risks, as they are heavily invested in volatile sharemarkets.

High exposure to sharemarkets means you can face “short-term volatility” when markets fall as they did last March, Mr Goudie said.

And sometimes markets don’t recover as quickly as they did after the initial COVID slump.

After the global financial crisis, the Australian sharemarket did not return to its late-2007 peak until late 2019.

Balanced superannuation funds recovered quicker than that, because they invest in a range of unlisted assets that were not hit by the GFC to the same degree.

But had you been invested in an all-share (high-growth) super fund, you would have seen your balance suffer for a long time.

Remember also that when you are still working and contributing, the money you put into your fund after the sharemarket crashes allows you to buy in at lower prices, which helps speed up your recovery.

Mr Goudie said if you’re someone who can take a risk, you need to remember that it is normal for sharemarkets to experience volatility.

Dangers of being too conservative

One thing to be cautious about is cranking down the risk in your super fund as you move towards retirement.

“If you’re 55 and your partner is 50, don’t think, ‘I’ve got 10 years until retirement,” Mr Goudie said.

Superannuation is an investment for your life, not for your working life, so “at 55 you are essentially investing for 35 or 40 years – until you die,” he said.

And with that time frame, you can afford to live through some volatility, and will need the extra value created from investing in growth assets over time.

The New Daily is owned by Industry Super Holdings