Your Super & Your Returns – 2023 performance

There’s been some impressive super returns this year but how do the numbers stack up, really?

For the financial year ending June 2023 (SuperRatings report)

• ESS Super fund - dedicated to emergency services and Victorian government employees - was ranked as the top-performing balanced superannuation fund in Australia, with a return of 13.3% which exceeded the median rate of 9% in the SuperRatings' index of 50 super funds, a fantastic recovery after the super sector's loss of 3.4% last year.

• Next was Vision SS (11%), then Brighter Super (10.6%).

• UniSuper was the best-performing mega fund, with a balanced option return of 10.3%, followed by Equip my Future (10.1%), Australian Retirement Trust (10%) and IOOF Employee Super Core (9.8%).

• Rounding out the top 10 were Aware Super (9.7%), Mercer Super Trust and Hesta Balanced Growth both at 9.6%.

But we've all heard the saying, past performance is not an indicator of future performance, right?

And you can’t really assess a super fund on its last 12 months performance.

So, what about performance over 10 years?

We wanted to show you this table with the top 10 Balanced super options (60-76% growth assets) ranked by 10-year return (up to 30 June 2023).

As you can see the top performers over 10 years are very different from the top funds over 12 months, with the mega funds of Hostplus, Australian Super, Australian Retirement Trust, Unisuper and Cbus taking out the top 5 places. And there’s only .6% difference return between those funds.

Mega Super Funds

Which gets us into the territory of mega super funds. What do we mean by that? It means they are very large and refers to the funds under management (FUM) of the fund and when a super fund has over $100 billion in FUM then it’s classified as a mega fund.

And they continue to grow.

As of 1 July 2023, under the superannuation guarantee (SG), employers must pay superannuation contributions of 11% of an employee's ordinary time earnings towards their super fund. So, these mega funds are becoming even…mega!

How will funds perform into the future?

SuperRatings executive director Kirby Rappell warns that investors should also brace for more ups and downs in their super funds’ returns next financial year – that’s now!

“Since the onset of the COVID-19 pandemic, managing volatility has really come back into focus for funds after almost a decade of steady gains,” he said. “The sharp rise in inflation and global uncertainty has been a constant over the past couple of years, and we expect this to persist.”

This mirrors warnings by superannuation executives earlier this month.

Asset Class Performance

Morningstar Australia 2023

Here is the Morningstar Asset class gameboard, showing the performance of seven major asset classes over the last 20 years to June 2023. This highlights the winners and laggards of each year, and how difficult it is (for fund managers and investors) to pick future winners.

Issues to consider:

1.       What are funds doing with your contributions;
2.       Where are they investing your money;
3.       How are they reporting returns; and
4.       Is it only returns that matter? 

Fees, life insurance, member services (i.e. does your fund offer a TTR product) and investment choice are also relevant. However, if your fund has a long track record of underperformance it could be time to switch to a product with a history of superior returns.

How do super fund value their unlisted assets?

Unlisted assets are investments that aren’t listed in an exchange and can include:

• Infrastructure (roads, power grid);

• Property (shopping centres, warehouses);

• Private equity (investments in private companies); and

• Private credit (loans to fund anything from commercial real estate construction to infrastructure assets)

Over the last year, some super funds have reported high returns in their public funds, most of which contain some form of unlisted asset. However the valuations of publicly listed assets vs. unlisted assets may be considerably different (e.g. there was a 27.1 % difference in commercial property returns reported by the Property Council of Australia)

This has come to the attention of APRA (super fund regulator) who is concerned that super funds must appropriately report asset valuation.

Next steps:

Take care with your investments.  For more info you can download the VivaEthical Introduction to Investing here. If you have questions relating to your tax and super needs, call us for a quick chat or drop us a line.

References:

Australia Super Understanding listed and unlisted assets
BDO Unlisted assets - a super funds secret weapon 23 June 2023
Gruber, James, Morningstar How asset classes have performed this year and what’s next 14 July 2023
Super Guide Best performing super funds
Wooten, Hannah, Australian Financial Review Top 10 super funds for 2022-23 revealed 17 July 2023

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